NNN - how to calculate projected depreciation?

Question

Joel Owens · Answer

Commercial is 39 years.

Typical split out is 75% building and 25% land for depreciation schedule. Some push to 80% building and 20% land.

You could also try cost segregation as well.

Are you paying all cash, using a 1031 exchange, getting a loan?

The type of restaurant, who is backing the lease, and primary lease term left is just as important as any depreciation.

Joel Owens · Answer

Rina all I do is commercial retail. Depreciation schedule is 39 years. You could possibly do some cost segregation for advanced depreciation.

You need to run your strategy by a tax accountant for clarity on any tax depreciation and write downs.

Steven Hamilton II · Answer

My advice would be to contact someone for  cost segregation. Search around in your prices and you'll find that some of us accountants partner with an engineering firm.

Byam Alexander · Answer

Rina,

I'm consultant with a national cost segregation engineering firm.  If you provide the following, I can get a preliminary, no cost analysis for you and your team:

Location: [Insert  address, city, state, and zip]

Type of Property: Retail

Marginal Tax Rate: [Select one]

Sq. Footage: 2,000 SFCost of Improvements [Insert cost $ here]Date improvements completed [Insert date mm/dd/yy]

Date improvements completed [Insert date mm/dd/yy]

Cost of Acquisition (minus value of land) [Insert cost $ here]Property Acquired: [Insert date mm/dd/yy]

Property Acquired: [Insert date mm/dd/yy]

Date placed into service: [Insert date mm/dd/yy]

Joshua Leite · Answer

Rina,

What Joel and Steven are saying is correct if you are looking to depreciate aspects of the property on a less than 39 year basis. A cost segregation analysis will look at all of the components of the building and break out which items can be depreciated over 5,7, 15 or 39 years depending on their IRS classifications. As Steven said there are firms out there (such as Moss Adams, Cohn Reznick, etc) that have engineering arms that can complete a cost segregation analysis as well as a benefit analysis to see what the estimated tax savings could be using a cost segregation to shorten the depreciation periods.

Josh

Rina Amir · Answer

@Joel Owens is is still 39 years? It didn't change to 15 years? @Bill Exeter Its a new purchase with a loan.

Thank you for your answers.

Bill Exeter · Answer

Is this a direct/new purchase into a net lease property or are you 1031 Exchanging into the property You cost basis for depreciation purposes will be different if you are 1031 Exchanging into the property as opposed to an outright new purchase.

NNN - how to calculate projected depreciation?

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