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I am trying to determine, how exactly I am suppose to calculate this...
Purchase price - Land Value = Building Value
Building Value/27.5 years = Allowable annual depreciation
The problem I have is that I know the Purchase price which is half of the appraisal price... I know the land price from the appraisal... Am I suppose to take the full Land Value or half the Land Value considering I bought the building at half its appraisal price... I would assume the full Land Value but I want to be sure... anyone know?
"You buy a house and land for $200,000. The purchase contract does not specify how much of the purchase price is for the house and how much is for the land.
The latest real estate tax assessment on the property was based on an assessed value of $160,000, of which $136,000 was for the house and $24,000 was for the land.
You can allocate 85% ($136,000 ÷ $160,000) of the purchase price to the house and 15% ($24,000 ÷ $160,000) of the purchase price to the land.
Your basis in the house is $170,000 (85% of $200,000) and your basis in the land is $30,000 (15% of $200,000)."
It looks like it is NOT the full value of the land appraisal..
Sounds like you have more of an accounting/IRS depreciation question than an appraisal question about accrued depreciation. I was all ready to go into a post about different types of depreciation - incurable, curable, economic, functional, etc.. Glad you got your question answered.
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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You got it right as far as the IRS is concerned. They are very comfortable with an assessed value which should not be confused with an appraisal value. One could use the appraisal value of land to subtract out from the building value, but it might not stand up in an audit by the IRS and you might have to fight for it.
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