Depreciating Land - Legally?

[Bryan Hancock]

I ran across this article this evening when I was researching some other tax matters:

Who says you can't depreciate land?

The basic procedure seems to be:

1. Split the improvements from the land

2. Deed the land to a trust you set up with an independent trustee

3. Make a trusted adviser the independent trustee and your children the beneficiaries of the trust

4. Create land lease

The lease would the be deductible. The delta between your marginal rate and that of your children seems to be the savings.

Has anyone ever heard of this? If you own quite a bit of expensive land this would seem to be something potentially fairly lucrative to generate some extra deductions for those paying high taxes.

[David Krulac]

@Bryan Hancock

Lets say you owned a mobile home park where are the homes were owner occupied. The accouterments of the land could be depreciated, even though the land could not.

Or say you owned a surface parking lot, the asphalt could be depreciated though the land itself could not.

Or at an apartment complex, the swimming pool, tennis courts, playground equipment, and other improvements could be depreciated though the land it self could not.

Somebody I know owns land under a national chain hotel. He doesn't own any of the improvements as the sidewalk, driveway, parking lot etc belong to the hotel owners, so my friend owns no depreciateble asset.