Depreciation on Multifamily - Offset Ordinary or Capital Gains?

[Dan Handford]

I am curious about what the concensus is when discussing depreciation on a larger 100+ unit multifamily complex with LP investors? 

If you have a property that is producing $500K in positive cash flow (income after debt service) and you have $1mil in depreciation, you would have $500k in additional depreciation. This additional depreciation would be split amoungst the investors, correct? When the investors receive their K-1 at the end of the tax year, can this additional depreciation offset their ordinary income and/or capital gains from other business/real estate ventures?

Any help on this would be great. Thanks!