Leasehold improvements

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Subject Author Date Leasehold improvements Dick Adams 09-29-2009  Re: Leasehold improvements paulthomascpa 09-30-2009  Re: Leasehold improvements HLunsford 09-30-2009  Re: Leasehold improvements Stuart A. Bronstein 09-30-2009  Re: Leasehold improvements Gene E. Utterback, EA, RF... 10-01-2009  Re: Leasehold improvements Stuart A. Bronstein 10-01-2009  Re: Leasehold improvements Dick Adams 10-01-2009  Re: Leasehold improvements Stuart A. Bronstein 10-01-2009  Re: Leasehold improvements Dick Adams 10-01-2009  Re: Leasehold improvements Arthur Kamlet 10-01-2009  Re: Leasehold improvements Dick Adams 10-01-2009  Re: Leasehold improvements Seth 10-01-2009  Re: Leasehold improvements Dick Adams 10-04-2009  Re: Leasehold improvements Seth 10-04-2009  Re: Leasehold improvements Seth 10-01-2009  Re: Leasehold improvements Stuart A. Bronstein 10-01-2009  Re: Leasehold improvements Mark Bole 10-02-2009  Re: Leasehold improvements Stuart A. Bronstein 10-02-2009  Re: Leasehold improvements Seth 10-02-2009  Re: Leasehold improvements Seth 09-30-2009  Re: Leasehold improvements HLunsford 10-01-2009  Re: Leasehold improvements Stuart A. Bronstein 10-01-2009  Re: Leasehold improvements HLunsford 10-02-2009  Re: Leasehold improvements Stuart A. Bronstein 10-02-2009  Re: Leasehold improvements HLunsford 10-03-2009  Re: Leasehold improvements Stuart A. Bronstein 10-03-2009
Posted by Dick Adams on September 29, 2009, 9:43 pm Please log in for more thread options Taxpayer took a job in Canada amd rented his home. Tenant requested a 10 year lease because they wanted to build an attached garage. Seven years later the tenant and spouse died in a car accident. Am I correct that the garage is a leasehold improvement that adds to the taxpayer's basis? Dick -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by paulthomascpa on September 30, 2009, 7:42 am Please log in for more thread options > Taxpayer took a job in Canada amd rented his home. Tenant > requested a 10 year lease because they wanted to build an > attached garage. Seven years later the tenant and spouse > died in a car accident. > > Am I correct that the garage is a leasehold improvement > that adds to the taxpayer's basis? I can't see how it adds to basis when no money was paid out and there wasn't an "inheritance" since he owned the property already. -- Paul Thomas, CPA www.paulthomascpa.com -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by HLunsford on September 30, 2009, 9:52 am Please log in for more thread options Dick Adams wrote: > Taxpayer took a job in Canada amd rented his home. Tenant > requested a 10 year lease because they wanted to build an > attached garage. Seven years later the tenant and spouse > died in a car accident. > > Am I correct that the garage is a leasehold improvement > that adds to the taxpayer's basis? > Here is the question I would ask a client in such a case: Was the cost of the added garage included in income as rental income back then? If so, then that increase in basis 10 years ago would have started to be depreciated for 27.5 years. If not;;;?? it should have been. Thus at the end of the seven years, basis of the house is cost less depreciation on both the house and the garage. ChEAr$, Harlan Lunsford, EA n LA -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Stuart A. Bronstein on September 30, 2009, 10:07 am Please log in for more thread options > Dick Adams wrote: >> Taxpayer took a job in Canada amd rented his home. Tenant >> requested a 10 year lease because they wanted to build an >> attached garage. Seven years later the tenant and spouse >> died in a car accident. >> >> Am I correct that the garage is a leasehold improvement >> that adds to the taxpayer's basis? >> > Here is the question I would ask a client in such a case: > Was the cost of the added garage included in income as rental > income back then? If so, then that increase in basis 10 years > ago would have started to be depreciated for 27.5 years. > > If not;;;?? it should have been. As I recall there was a provision in the tax code (is it still there?) that says leasehold improvements made by a tenant but benefit the landlord at the end of the lease, are not taxed to the landlord. If there's no tax on the improvement, seems to me there'd be no increase in basis for it, either. -- Stu http://downtoearthlawyer.com -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Gene E. Utterback, EA, RFC, AB on October 1, 2009, 2:01 pm Please log in for more thread options >> Dick Adams wrote: > >>> Taxpayer took a job in Canada amd rented his home. Tenant >>> requested a 10 year lease because they wanted to build an >>> attached garage. Seven years later the tenant and spouse >>> died in a car accident. >>> >>> Am I correct that the garage is a leasehold improvement >>> that adds to the taxpayer's basis? >>> >> Here is the question I would ask a client in such a case: >> Was the cost of the added garage included in income as rental >> income back then? If so, then that increase in basis 10 years >> ago would have started to be depreciated for 27.5 years. >> >> If not;;;?? it should have been. > > As I recall there was a provision in the tax code (is it still > there?) that says leasehold improvements made by a tenant but > benefit the landlord at the end of the lease, are not taxed to the > landlord. > > If there's no tax on the improvement, seems to me there'd be no > increase in basis for it, either. > > -- > Stu > http://downtoearthlawyer.com I really want to be Stuart on this one - the only increase you should get in basis would be due to any income you reported as a result of the improvement. However, I'm not sure about this. Please not that I said NOT SURE, because I'm not. I'd want to research it get an answer you could rely on, but I am concerned about: 1 - windfall benefit. If you buy a desk for $100 and find an original Monet in one of the drawers isn't there some windfall tax that you'd be responsible for? Would this impact basis? 2 - what about those home improvement shows, where they fix up or completely rebuild a home. I believe that the value of these improvements is considered income to the home owners, in which case if they paid tax on it, it should add to basis. 3 - is there any argument that the house WOULD have rented for more had it had a garage and it was rented for less under the condition that the garage be built and transferred to the owner upon termination of the lease? I think this is similar to Harland's position, which I think may have merit. Let us know what you find out (or decide to do), Gene E. Utterback, EA, RFC, ABA -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted Energy Improvements to Rental Property January 8, 2007, 9:39 pm Home office: Depreciate or expense improvements December 20, 2006, 9:52 pm 1040D Real Estate Sale/Gain-Improvements... March 19, 2007, 2:04 am Home improvements to reduce profit from home sale? October 24, 2006, 7:27 am