To estimate 40 year depreciation of improvements, what percent of property cost might be used?

This is in regard to estimating viabililty of a nnn sale leaseback of a national distribution facility. Is a 70% estimate for improvements (vs 30% for land) too high?
In Buying Property - Asked by Jere C. - Dec 13, 2009
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Answer(s)

Mike G.
Property/Asset Manager
Chicago, IL

You should always refer to the IRS, an attorney, or a tax professional for these types questions.
However here's the IRS link for the appropriate tax guidelines; http://www.irs.gov/pub/irs-pdf/p527.pdf
The answer starts at the bottom of the third column of page 7 under "Separating cost of land and buildings."
Hope this helps.

Dec 14, 2009
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Paul S.
Broker/Agent
Glendora, CA

Always check with and accountant but a starting point might be what the local property tax authority is assessing the the improvement value as. As a note, I believe such a facility would be depreciated at 39 years not 40.

Dec 15, 2009
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Robert L.
Broker/Agent
Ormond Beach, FL

Depreciation of personal property (5/7 years), land improvements (15 years) and structural building components (39 years) in a manner that will stand up to IRS audit requires a proper and effective Cost Segregation Study performed by qualified engineers with a working knowledge of current IRS rules/guidelines. There are firms that can provide Cost Segregation Studies with no up front fees. Once the study is done and a client is shown the tax benefits of the cost segregation, the fees are typically less than the tax benefits.

Dec 17, 2009
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Ahmed S.
Broker/Agent
Antioch, CA

By doing cost segregation study.Certain % can be re-classified as personal property.and base on the purchase price. the building at 39 the land 15,personal 5,7.You can accelarate 20-30% of the building component to 5 and 7 from39.in service date is the date that they use.cost segregation study is recommended if your benefitst to the cost of study is 10:1 or more. I hope that helps.

Dec 19, 2009
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