Determining Property Cost versus Land Basis

[Clay W.]

Would appreciate clarification on best determining my dwelling versus land value for depreciation:

-    Purchased first duplex - Early April 2018 - $369,000 - California

-    New Tax Assessment received assumes $143,541 (Land) and $225,459 (Fixtures)

-    However, while my appraisal gave the sales comp approach the most weight in determining value, the Cost Approach was second and had the following breakdown:

      "...Site value was determined by a review of assessors tax records for land value and was determined to be the most effective as there were no recent lot sales. Similar lots had values ranging from $52k to $93k. Opinion of site value: $61k - Dwelling $312k + Garage $42k (Total Est. Cost New = $354k)."

**I understand that land values in California are higher, but should I really attribute roughly 39% of my cost to land? I also spent approx. $4k for new fencing, which I know should be included in my overall basis as a capital improvement, but I have read that it has a shorter depreciation schedule, so how do I show this on my taxes for 2018?

Thank you~

[Basit Siddiqi]

@Clay W.

There are multiple options that the tax courts/IRS has deemed appropriate to allocate tax basis to building/land. You should work with your accountant to determine which option would be most favorable to you.