Leasing property back to yourself ?

Question

We are looking at 24 acres of land to buy for our horse farm. We’ve always had horses and have leased land from property owners to run our farm business. This will be the first time we would own the land. I’m wondering if it’s best to treat the land as an investment property and lease it back to ourselves and our farm business. I’ve heard that some doctors or other professionals will privately own their real estate and lease it to their professional business. Is this a logical thing to do when you are investing in real estate and have a separate business entity that would utilize the real estate?

Chris Coleman · Answer

Again, I can't speak specifically to the rules as I'm not an accountant...just a business owner and real estate investor who has done it.  But from my experience you can depreciate buildings and equipment used in the operation of the business.

Chris Coleman · Answer

@Joseph Niedermeyer with office space, yes this can be a very good deal financially.

However, with land, you do not get to take depreciation on the value.  So for that reason, I would suggest talking to a real estate savvy accountant about it.

Joseph Niedermeyer · Answer

@Chris Coleman

Thank you. Out of curiosity, would that take into account the value of the improvements on the farm. Barn, fencing, sheds, arena, out buildings, etc. could easily cost $200,000 to build. I know land is t deprecated but surely structures can be.