Developer · Chicago IL · Member since 2021 · 1 post · 0 votes
Has anyone else had experience with doing cost segregation and depreciation on a property that you plan to (or did) tear down to do a new development? We purchased a commercial property and closed in August that was a former gas station (currently closed and vacant). We are doing zoning and entitlement now to start a new 4 or 5 unit multifamily townhome project to start construction in spring 2022.
Specialist · Raleigh, NC · Member since 2018 · 28 posts · 21 votes
4y
A CPA should confirm this, but my understanding is if it was closed and vacant, and not 'in service' at the time of purchase, it was essentially acquired for the land value. With no income producing building, there is nothing you can do.
However, if the gas station was 'in service' (i.e. - had a tenant and paying rent), then it later went 'out-of-service' - even if only a few months - then you could do cost segregation on it. More importantly the tear down of the entire building basis could be applied as retirement or disposition of asset expense. This would be far more valuable to you than the cost seg and bonus depreciation.