Depreciation or Capital Cost Allowance - To claim or

My question is: Canadian-specific
QUESTION: I've read about the advantages of using depreciation to lower
taxes but I understand you get hit hard with taxes when you sell because of
the bigger difference between the depreciated price and the selling price.
As a real estate investor, how should I use depreciation?  If I'm sure I'll
hold the property, should I start using depreciation?  If I know I'm going
to sell soon, should I not use depreciation?  What if I haven't decided what
to do yet?  Thank you.
david ingram replies:
If you would buy an RRSP or an IRA, you should use depreciation when you can
and it is available.
However, a short term depreciation can work against you.
For instance, you can only use depreciation on rental property to offset
taxable profit.
You could own a rental building for 10 years, never ever make a profit and
not claim depreciation until the 10th year when a generally low overall
taxable income has you in a 30% tax bracket and $1,000 of depreciation would
get you back the grand sum of $300.  Then you sell the property the next
year for a $300,000 capital gain and have to pay tax on your regular income,
the taxable $150,000 of the capital gain (1/2 of the gain) and the $1,000
depreciation claimed the year before.
In this case you would be adding the $1,000 back at a 44% tax bracket and
paying $440 tax back for the $300 refund received the year before.
However, I have picked an extreme case.  If your marginal tax bracket was
44% anyway, you would always claim depreciation because you will be paying
it back at the same or a lower rate.
And in general I usually tell people to claim it when they can.  If you save
$1,000 in tax today and don't have to pay it back for ten years it is almost
always has to be to your benefit.
Each situation is likely different but I hope this helps.
This is the Canadian answer.  The US insists that depreciation be claimed
and recapture is calculated on the depreciation that was "allowable" even if
you did not actually get it.  The Canadian system is much easier. And just
to keep the answer straight, depreciation is an American term.  Canada's
term is officially "capital cost allowance" otherwise known as CCA.
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