Discussion:Changing allocations of land vs improvements

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Discussion Forum Index --> Basic Tax Questions --> Changing allocations of land vs improvements

Discussion Forum Index --> Tax Questions --> Changing allocations of land vs improvements

Kendrick (talk|edits) said:

29 September 2007
TP converts home to rental property. Basis in home is $200,000, same as when TP bought it (no additions). When purchased 10 years ago, the land/improvements allocation by the county property tax assessor was 40% land 60% improvements.

The most recent property tax bill prior to converting home to rental property was 75% land 25% improvements.

Which do you use for determining improvement percentage of the $200,000 for depreciation, 60% or 25%?

Thanks for any input.

Uncle Sam (talk|edits) said:

29 September 2007
I would ask the property assessor why the big difference in ratios before I used any percentages.

John2CPA (talk|edits) said:

1 October 2007
I would speculate that the reason land went from 40% to 75% is because the land appreciated in value at a much faster pace than the building (I think this is the case in a lot of areas). Further, since we are bound to using the basis from 10 years ago as our cost in the rental property, I would take the position that the 40/60 allocation is more correct to use (Our basis was $200k 10 years ago, so we should use the allocation that relates to it).

Dennis (talk|edits) said:

1 October 2007
You have a basis in the building of original purchase ($120,000?) plus improvements. Building goes into service at lower of basis or fmv. Seems to me that if building lost value over time it would not have been in condition to rent so there is no problem. ♫

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