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It Just Goes Away… and Depreciation!

November 11, 2010

Black Hole Code:

Taxpayers who have cancellation of indebtedness income (CODI) that is excluded from their income for some reason must reduce their tax attributes, such as NOLS, to the extend of the excluded CODI. If they do not have sufficient tax attributes to cover the full amount of the CODI excluded, they do not have to do anything else in future years. It is referred to as Black Hole CODI because it just goes away.

Depreciation Building With Both Commercial And Residential Space:

Under the general depreciation system (GDS) property is depreciated as residential property (27.5 years) if 80% or more of its gross rental income for the tax year is from dwelling units. A dwelling unit is a house or apartment used to provide living accommodations ion a building or structure. It does not include a unit in a hotel, motel, or other establishment where more than half the units are used on a transient basis. If you occupy any part of the building or structure for personal use, its gross rental income includes the fair rental value of the part you occupy.

Let us know at GAI ( if you have any questions or concern re these hot topics. Give us a call at 212-979-6830 or stop by for a visit. See you soon!


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