How to find Depreciation value

Question

I live in Orange County, ca and want to know how to figure out how much I can use for depreciation in my taxes.

Not my house but can you show me how to find depreciation value for below addresS:

7692 Alhambra Dr

Huntington Beach, ca 92647

Ben Raygor · Answer

@Fareed R.

I agree with the others who indicate that you should be using the county tax assessment apportionment for building/land and that an official appraisal might help you out by giving more favorable numbers. It seems like most appraisers just use the tax assessment numbers most of the time unfortunately.

The IRS is not going to look favorably on a high building value on a tax return if the official records (tax assessment and appraisals) are pointing to low building values. You need to have proof to justify your position.

Aaron K. · Answer

@Fareed R. this one looks a little weird because the land value is way more than the structure value and it is usually the other way around http://oct.estreamone.com/Show.aspx?parcel=14228515&year=2019but generally it would be

total value - land value divided by 27.5 ask your tax pro to be sure, I think it is 27.5 but I always forget the exact number.

Natalie Kolodij · Answer

That's surprising because a TON of properties in coastal cities have way more value to Land than building.

If this is a crappy house in a desirable area- the land is the value.

In seattle 1940s 900 square foot houses aren't worth the 800k people spend- it's the location/ land value on historic queen anne hill.

It's fairly common to see high land values.

Ben Raygor · Answer

Appraisal reports can vary with terminology used, so I can't say anything about the context of this one, but Site and Site Improvements most commonly refer to Land and miscellaneous land items like driveway, landscaping, etc.

Fareed R. · Answer

@Ben Raygor

City says “improvements” are 100k

Appraiser said “opinion of site value” 400k

Not sure if both terms are the same also

Ben Raygor · Answer

@Eamonn McElroy That is a great court case and an addition to my statement would be appropriate.  "The IRS is not going to look favorably on a high building value on a tax return if the official records (tax assessment and appraisals) are pointing to low building values...so you had better be ready with a response for the IRS if they question/challenge your basis apportionment and you are using a basis ratio that is more favorable for you than the ratios calculated by the tax assessment and appraisal.  Per Meiers v. Commissioner (TC Memo 1982-51), one such example of supportable grounds could be a calculation of the estimated building replacement costs."I like that the court said "We conclude that petitioner's valuation had a reasonable basis and was much closer to the mark than respondent's".  It implies that the court should be reasonable in considering what "the mark" might be in any given situation.  Unfortunately, the court did not provide any additional information about other reasonable methods to determine "the mark" for real estate.  I 100% agree that we should care about what is supportable and favorable to the taxpayer.  That's where I always start and if we think the "official" document ratios are unrealistically unfavorable, we have a conversation about what other supportable methods might be available for determining a possibly higher building ratio.  Through all of this, the taxpayer needs to be thinking about how much effort is it worth to fight for a higher building ratio.  The purchase price of the property will obviously make a big difference in influencing the value of exploring other valuation options for the property.

Eamonn McElroy · Answer

@Ben Raygor

"The IRS is not going to look favorably on a high building value on a tax return if the official records (tax assessment and appraisals) are pointing to low building values."

And they can pound sand.  We should care about what is supportable and favorable to the client, not what the IRS thinks, especially if they've already lost in court.  Meiers v. Commissioner (TC Memo 1982-51)

Eamonn McElroy · Answer

@Fareed R.

County tax assessment isn't always the most optimal way to allocate purchase price of a real estate asset acquisition, nor is it the most accurate method and the courts agree.

If this is anything beyond a hypothetical question, I'd advise you to consult your tax advisor.

Ben Raygor · Answer

@Fareed R. Are you saying that the stated dollar amounts are 3.5x off from each other or that the Building/Improvements ratio is 3.5x off from each other?  For example, if you are talking about dollar amounts, they could be 3.5x off from each other while still being close in terms of building ratio.  It could be that the appraisal is using an updated estimated FMV of the property that is much more realistic.  In both scenarios, you want to calculate the building ratio by taking the stated building value and dividing it by the stated total property value to get your building ratio.  I'd be surprised if the building ratio from an appraisal is 3.5x higher than the building ratio from the tax assessment.  If so, you may need to discuss further with a tax preparer to analyze the situation and determine your next best step forward.

Fareed R. · Answer

@Ben Raygor the appraisal and city are about 3.5x off from each other...

How to find Depreciation value

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