Property Valuation
What is 'depreciation' for tax purposes and how does it differ from appraisal depreciation?
AThey are identical; both measure the same decline in value
BTax depreciation is a cost recovery deduction over a prescribed period regardless of actual value change; appraisal depreciation is the actual loss in value from all causes✓ Correct
CAppraisal depreciation follows IRS guidelines; tax depreciation is based on market conditions
DTax depreciation applies to land; appraisal depreciation applies to improvements
Explanation
Tax depreciation (cost recovery) is a non-cash deduction allowing investors to recover capital costs over IRS-prescribed periods—39 years for commercial buildings, 27.5 years for residential rental property.
Related Illinois Property Valuation Questions
- Assemblage and plottage are relevant to property valuation primarily when:
- An Illinois appraiser is appraising a 20-unit apartment building. Which approach to value is MOST appropriate?
- If a comparable property sold for $310,000 and had an extra full bathroom that the subject property lacks, the appraiser would make what kind of adjustment?
- An appraiser who uses the cost approach for a 50-year-old building must account for which three types of depreciation?
- Which of the following would indicate that a neighborhood is in the 'decline' phase of the neighborhood life cycle?
- A property earns $48,000 in annual net operating income. An appraiser uses a 7.5% capitalization rate. What is the estimated value?
- An appraiser uses the income approach and determines a net operating income of $75,000 with a cap rate of 6%. What is the estimated value?
- A competitive market analysis (CMA) is typically prepared by a:
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