year holding period. Also, RECAP,2" captures the portion of the total taxable gain on sale

that results from depreciation. Total taxes due on the sale of the replacement property in

year t+n, conditional on a sale-purchase strategy, are therefore expected to be

 TDS, = c CG2 + drRECAP2,. (5)

 Next, the components of the after-tax proceeds from a fully taxable sale of the

relinquished property at time t (the first term on the right-hand-side of equation (1)) are

examined. Note that

 ATSP' = (P' SC) -, gCG] rdRECAP1, (6)

where P' is equal to the price of the relinquished property and SCd is equal to total

selling costs at time t. Similar to the subsequent sale of the replacement property at time

t+n, the capital gain and depreciation recapture portions of the total taxable gain from the

sale of the relinquished property at time t are

 CG\ = (P1 SC ) UNDBASIS} (7)

and

 h
 RECAP,' = DEf (8)


where UNDBASIS} is the undepreciated cost basis of the relinquished property at time t

andDEP1 is equal to


 DEP1 _(1 L0 )^h (9)
 RECPER

 Pth represents the acquisition price of the existing property when purchased h

years ago, L,_ is the percentage of the original acquisition price that was non-