Tax Basis for deprecation, but some costs paid in 2nd year?

[Erik Nizenkoff]

Hi,  I purchased a commercial property at the end of December 2017.  I wasn't billed for some of my lawyer's fees and inspection fees until 2018, around $20k.  It is my understanding that I can add these to the basis for depreciation.  How does this work since the fees weren't all paid in the year the purchased closed?  Do I calculate the 2017 depreciation on the week and a half that I owned the property, but not include the fees paid in 2018?  Do the fees paid in 2018 start a new clock and they depreciate in 39 years on their own?  Thanks for any advice!

[Logan Allec]

@Erik Nizenkoff I would just place what you purchased in service when escrow closed and then just start a new clock on the new assets.  Keep in mind that you should allocate them between land, building, etc., just as you did your original purchase.

[Christopher Smith]

Assuming the additional fees relate to the original acquisition, I would total all costs incurred and depreciate them as a single asset beginning with the date the property was placed in service. In other words, regardless when you actually paid the cash.

[Logan Allec]

@Erik Nizenkoff, when was the building placed in service?  Or were tenants in-place when you purchased?

[Erik Nizenkoff]

@Logan Allec  The tenants were in-place when I purchased.  The 2018 bills are from my real estate lawyer, and from the Environmental Phase I/II.

[Logan Allec]

@Erik Nizenkoff I would just place what you purchased in service when escrow closed and then just start a new clock on the new assets.  Keep in mind that you should allocate them between land, building, etc., just as you did your original purchase.

[Carl Fischer]

@Erik Nizenkoff

Have your CPA read these great answers and leave it to him/her  to decide. Just make sure it is covered somewhere. The risk and expertise is on the CPA to do it correctly-spend your time looking for deals unless you really enjoy that accounting stuff. 

[Michael Plaks]

Originally posted by @Logan Allec:

@Erik Nizenkoff I would just place what you purchased in service when escrow closed and then just start a new clock on the new assets.  Keep in mind that you should allocate them between land, building, etc., just as you did your original purchase.

I second Logan. Except I would not bother allocate the additional basis to land. I'd make sure to allocate enough to land and whatnot from the initial asset and have 100% of the extra to building.