If the taxable income on a property is greater than the before tax cash flows, what does this indicate about the property's characteristics?

When the taxable income on a property exceeds the before-tax cash flows, it indicates that the property does not possess tax sheltering characteristics. Tax sheltering typically occurs when certain expenses, such as depreciation, can reduce taxable income but do not affect cash flow.

In this scenario, if taxable income is higher than cash flows, it suggests that there may be limited ability to utilize deductions that could shelter income from taxes, implying that the income generated is being taxed at a higher rate relative to cash flow. This situation can lead to a higher tax burden, as the cash generated doesn't account for all potential tax advantages that might be available if sufficient deductions were present. Therefore, observing this relationship emphasizes that the property lacks the beneficial aspects of tax sheltering.