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Practical Income Manual 2021.

Compensation for lease contracts prior to May 9, 1985

Regulations: Transitional provision third Law Personal Income Tax

In determining the income from real estate capital derived from lease contracts entered into prior to May 9, 1985, which do not enjoy the right to review the rent of the contract, it will be additionally included as a deductible expense, while this situation subsists and in concept of compensation, the amount that corresponds to the depreciation of the property. Thus, in these situations, the depreciation expense may be computed twice: once as a tax-deductible expense in accordance with the rules for determining the net income derived from leased properties mentioned above, and again, as compensation.