Property Basis for Depreciation

[Jon Dorsey]

How do I attain basis for depreciation on this property;l?

I’m at odds with my CPA and looking to see what I can do to maximize my depreciation on the property  

I purchased a multifamily at an incredible deal, way under FMV due to a death in the family and the heirs not wanting the property.

Purchase: $300k

FMV: $550k

Tax Appraisal Land Value: $253k

The issue becomes that usually the improvements (road, signs, fence, dumpsters, electrical, water/sewer, lots, etc) usually run 60-70% of value of the investment and thus is depreciated but with the land value on this about equating to purchase price, I’m missing out on this write off. 

I was thinking of getting a cost segregation done to place a value on the infrastructure and improvements, and then add that to the tax appraised land value to determine my basis. My CPA kind of follows but doesn’t think we can create a basis above what I paid for the property.

What is your take on this or what have you seen that may be helpful?

Thanks in advance.

*Any advice received is not legally binding as you are not my CPA or Attorney*

[Eamonn McElroy]

@Jon Dorsey

You can't create tax basis above what you paid for the property unless income realization is involved.  As it seems you purchased this arms-length from an unrelated party, that doesn't seem likely.

"I’m at odds with my CPA and looking to see what I can do to maximize my depreciation on the property"

What's his/her position and what's yours?

"The issue becomes that usually the improvements (road, signs, fence, dumpsters, electrical, water/sewer, lots, etc) usually run 60-70% of value of the investment and thus is depreciated but with the land value on this about equating to purchase price, I’m missing out on this write off."

You gave us land value per appraisal, but not improvements value and total value.  Generally you'd allocate purchase price pro-rata according to the improvements percentage per the buy/sell appraisal or the county tax assessor's figures.  Whatever is most advantageous for you.

A cost seg may very well be advantageous, however you're in a unique position as the FMV is $550k but you only paid $300k.  I'll let the cost seg experts chime in on that one.