Summer 1977, Vol 2, No 1

Abstract: New preference tax rules have drastically reduced the benefit of accelerated depreciation deductions. Investors with substantial amounts of “preference income” may now prefer property on which only straight-line depreciation is allowable, the author points out. For such investors the additional tax liability incident to accelerated depreciation, coupled with stringent recapture rules, makes this an extremely expensive source of funds. Accelerated depreciation and capital gains have long been a core element in tax-wise investment planning, but the new rules may drastically alter the relative value of first-user status.