Buying a house in USA and will rent it. I need to calculate depreciation according to USA schedule as Japan’s doesn’t make sense for this. I understand there is an exception for this.
The イ号 exception
Under the income tax regulations, if the property is located in a country that has its own statutory depreciation rules (and the US does), you can apply the source country’s depreciation method as an alternative basis. The US qualifies, so 27.5-year straight-line is defensible under this exception — but it requires the right documentation and making the election correctly on the return.
Does anyone know if I’m going to run into any issues with this? Any suggestions or tips on what’s required, etc.?
by CAMT53
2 comments
You can only deduct the depreciation from your income if the home is new. The Japanese depreciation rate for wood framed buildings is 22 years so why would you want to choose the longer term in the US?
Under Article 1-2, item (i) (イ号) of the Ministerial Ordinance on Useful Lives (耐用年数省令), where a depreciable asset is located in a foreign jurisdiction that prescribes its own statutory depreciation rules, the taxpayer may apply the useful life prescribed under the laws of that jurisdiction as the basis for depreciation in computing Japanese rental income. The subject property is residential real estate located in the United States, where IRC Section 168 prescribes a 27.5-year useful life for residential rental property under the Modified Accelerated Cost Recovery System (MACRS).
I’m looking for anyone who has done this and what paperwork was used?
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