The 1986 tax reform act: potential effects on domestic and foreign investors

Abstract

Examines the way in which the 1986 Tax Reform Act affected the status of US real estate as a tax shelter. Demonstrates that because tax benefits previously were an important component of total returns from income producing real estate, its immediate effect is to reduce after‐tax returns from real estate. Argues that if market values fall and rents rise, however, after‐tax returns from income producing real estate should be sufficient to attract individual US investors. Adds that the 1986 Tax Act should attract more US pension funds and foreign investors to US investment real estate given that the buying advantage of US investors has been reduced.