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Old 03-28-2014, 01:56 AM
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Real property purchase subject to lease

LLC bought commercial property subject to new lease (under prior owner) for 20 yrs for fast food chain (FFC) FFC just built new drive thru on property. Lease contains provision that FFC will depreciate personal property (signs, kitchen equip, etc) but no mention about building that they built, but assume that they amortize LHI. LLC bought land with new building constructed on it, can the LLC also depreciate bldg, or amortize a lease premium roughly equivalent to bldg value on federal taxes?



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Old 03-28-2014, 03:19 AM
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Quote:
Originally Posted by Bob Baffert View Post
LLC bought commercial property subject to new lease (under prior owner) for 20 yrs for fast food chain (FFC) FFC just built new drive thru on property. Lease contains provision that FFC will depreciate personal property (signs, kitchen equip, etc) but no mention about building that they built, but assume that they amortize LHI. LLC bought land with new building constructed on it, can the LLC also depreciate bldg, or amortize a lease premium roughly equivalent to bldg value on federal taxes?
I guess so; however, the landlord must recapture the unrecaptured sec 1250 depre taxed as ordinary income at 25% when the landlord disposes of it later.amortization ofleasse premium is the concept of recovery of landlord incentive costs over the duration of the lease.



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