Straight Line Depreciation

In some cases the syndicator will take the same depre­ciation allowance every year. If the syndicator adopts the straight line method of depreciation it will be stated in the brochure. The following is an example of the straight line depreciation taken from a syndicate offering bro­chure.

The following table provides a breakdown of the cash distribution to a holder of a $10,000 Participation during the first year of ownership:

Cash Distribution	Portion Constituting Reportable Income	Portion Representing Return of Capital	Percent of Cash Distribution Reportable
$1,020	$684	$336	67.1%

The same breakdown will apply to each cash distribu­tion received in the second through twenty-fifth years. The buildings will be fully depreciated at the end of the twenty-fifth year, and the entire amount of cash distrib­uted thereafter will be reportable as income.

When you see a similar statement or computations you may assume with reasonable certainty that for 20 or 25 years the same percentage of your distributions will be subject to federal income taxes, unless the income of the syndicate goes up. If that is the case, the additional in­come will probably be fully taxable.

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