rate. Upon the sale of a property, depreciation recapture is the part of the gains that the depreciation deductions are responsible for during the period of ownership. The following is an example to show the idea of depreciation in a clear manner. A building owner buys a building for $20 million. After 5 years the owner has taken $1 million of depreciation deductions. Now, the building owner’s basis in the building is $19 million. If the owner decides to sell the building for $25 million, the building owner will realize a gain of $6 million ($25 million less $19 million). Oftentimes people wrongly assume that this $6 million is taxed at a capital gains rate. However, this is a common misconception. In this example, $1 million of the gain would actually be taxed at the depreciation recapture rate, and the other $5 million at the capital gains rate. In New Zealand, real estate investors receive a tax advantage. Investors can claim the mortgage interest they pay as a tax deduction, while homeowners cannot. This tax advantage subsidizes investors. Life insurance In the United States life insurance policies also have tax advantages. Income can grow in a life insurance policy that is tax deferred or tax-free. Additionally, there are certain advantages within certain life insurance policies that are excluded from estate and/or inheritance taxes. Investments Government bonds In the United States, many government bonds (such as state bonds or municipal bonds) may also be exempt from certain taxes. Investments in partnerships Additionally, investments in partnerships and Limited Liability Companies also have tax advantages. For individual owners of businesses, the LLC is taxed as a sole proprietorship. This means that the entity is not taxed, but the income earned by the entity is taxed to the owner. The LLC has important tax advantages, such as the owners profits potentially being taxed at the owners lower marginal tax bracket. Furthermore, losses can offset the sole proprietor’s non-business income. If there are multiple owners of a Limited Liability Company, there is also tax advantages associated with it. They can choose to be taxed as a partnership, but they can also decide to be taxed as a corporate-entity. Partnerships are not taxed, but corporations are. For LLCs taxed as partnerships the income is taxed to the partners. For a corporation or an LLC taxed like a corporation, the entity is subject to tax and dividends