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Prospective Changes in Tax Law and the Value of Depreciable Real Estate

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  • Patric H. Hendershott
  • David C. Ling

Abstract

The Economic Recovery Tax Act of 1981 significantly reduced the taxation of income‐producing properties by accelerating tax depreciation on both new and, especially, existing properties. A partial reversal of the 1981 legislation appears likely. To provide some insight into the possible effects of a decrease in tax depreciation of income‐producing properties, two potential tax changes are analyzed: an increase from fifteen to twenty years in the tax service lives of both new and existing properties and an increase for existing properties only. Both residential and commercial/industrial properties are considered.

Suggested Citation

  • Patric H. Hendershott & David C. Ling, 1984. "Prospective Changes in Tax Law and the Value of Depreciable Real Estate," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 297-317, September.
    • Handle: RePEc:bla:reesec:v:12:y:1984:i:3:p:297-317
    DOI: 10.1111/1540-6229.00324
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    1. Patric H. Hendershott & James D. Shilling, 1981. "The Impacts on Capital Allocation of Some Aspects of the Economic Recovery Tax Act of 1981," NBER Working Papers 0825, National Bureau of Economic Research, Inc.
    2. Hanushek, Eric A & Quigley, John M, 1980. "What Is the Price Elasticity of Housing Demand?," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 449-454, August.
    3. Alan J. Auerbach, 1983. "Corporate Taxation in the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(2), pages 451-514.
    4. Barton A. Smith, 1976. "The Supply of Urban Housing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(3), pages 389-405.
    5. William B. Brueggeman & Jeffrey D. Fisher & Jerrold J. Stern, 1982. "Rental Housing and the Economic Recovery Tax Act of 1981," Public Finance Review, , vol. 10(2), pages 222-241, April.
    6. Patric H. Hendershott & David C. Ling, 1984. "Trading and the Tax Shelter Value of Depreciable Real Estate," NBER Working Papers 1267, National Bureau of Economic Research, Inc.
    7. Patric H. Hendershott & James D. Shilling, 1982. "Capital Allocation and the Economic Recovery Tax Act of 1981," Public Finance Review, , vol. 10(2), pages 242-273, April.
    8. James M. Poterba, 1980. "Inflation, Income Taxes, and Owner-Occupied Housing," NBER Working Papers 0553, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Colwell, Peter F., 2002. "Tweaking the DiPasquale-Wheaton Model," Journal of Housing Economics, Elsevier, vol. 11(1), pages 24-39, March.
    2. Amédée-Manesme, Charles-Olivier & Barthélémy, Fabrice & Prigent, Jean-Luc, 2016. "Real estate investment: Market volatility and optimal holding period under risk aversion," Economic Modelling, Elsevier, vol. 58(C), pages 543-555.
    3. Fabrice Barthelemy & Jean-Luc Prigent, 2011. "Real Estate Portfolio Management : Optimization under Risk Aversion," THEMA Working Papers 2011-12, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    4. Fabrice Barthélémy & Jean-Luc Prigent, 2009. "Optimal Time to Sell in Real Estate Portfolio Management," The Journal of Real Estate Finance and Economics, Springer, vol. 38(1), pages 59-87, January.
    5. Michel Baroni & Fabrice Barthélémy & Mahdi Mokrane, 2007. "Optimal holding period for a real estate portfolio," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 25(6), pages 603-625, October.
    6. Charles-Olivier Amédée-Manesme & Michel Baroni & Fabrice Barthélémy & Mahdi Mokrane, 2015. "The impact of lease structures on the optimal holding period for a commercial real estate portfolio," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 33(2), pages 121-139, March.
    7. Timothy W. Viezer, 1999. "Econometric Integration of Real Estate's Space and Capital Markets," Journal of Real Estate Research, American Real Estate Society, vol. 18(3), pages 503-519.
    8. Patric H. Hendershott, 1997. "Uses of equilibrium models in real estate research," Journal of Property Research, Taylor & Francis Journals, vol. 14(1), pages 1-13, January.
    9. Wood, Gavin A., 2001. "Are There Tax Arbitrage Opportunities in Private Rental Housing Markets?," Journal of Housing Economics, Elsevier, vol. 10(1), pages 1-20, March.
    10. Charles-Olivier Amédée-Manesme & Michel Baroni & Fabrice Barthélémy & Mahdi Mokrane, 2015. "The impact of lease structures on the optimal holding period for a commercial real estate portfolio," Journal of Property Investment & Finance, Emerald Group Publishing, vol. 33(2), pages 121-139, March.
    11. Patric H. Hendershott & David C. Ling, 1985. "The Administration Tax Reform Proposal and Housing," NBER Working Papers 1740, National Bureau of Economic Research, Inc.
    12. Xin Zhang & David Geltner & Richard Neufville, 2018. "System Dynamics Modeling of Chinese Urban Housing Markets for Pedagogical and Policy Analysis Purposes," The Journal of Real Estate Finance and Economics, Springer, vol. 57(3), pages 476-501, October.
    13. Gavin A. Wood & Rachel Ong, 2013. "When and Why Do Landlords Retain Property Investments?," Urban Studies, Urban Studies Journal Limited, vol. 50(16), pages 3243-3261, December.

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