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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
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Experience:  10 years experience
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My lease states " All costs incurred by the Landlord by way

Customer Question

my lease states " All costs incurred by the Landlord by way of replacement of depreciable capital equipment shall be amortized on a straight line basis up to a five year period, it being understood that only the depreciated portion will be included in the Additional Rent for each year".
- The cost of capital equipment is $31,857.80
The useful life is 20 years.
What would be my cost per year?
Submitted: 8 months ago.
Category: Tax
Expert:  Mark Anderson replied 8 months ago.
$6371.56
Customer: replied 8 months ago.
Hi. This is not actually a tax question. The two key words are (1).".. up to a five year period.." as opposed to a five year term. Keeping in mind that the term amortization has a different meaning in accounting as opposed to the conventional understanding. In accounting it essentially refers to depreciation.
(2) to further segment the argument is that it continues to say.." it being understood that only the depreciated portion will be included in the Additional Rent."
Using conventional meaning of the word amortization the term is 5 year and the Tenant has paid in full the value of the capital equipment, and if the lease term is only 5 year and the value of capital equipment is 20 years, it then does not make sense for the Tenant to pay for something that is not to be used by the Tenant for the remainder 15 years.
Customer: replied 8 months ago.
I understand it as below:
capital equipment value $31,857.80
Life of equipment 20 years
using straight line depreciation the equipment would devalue each year by 31857.80 divided by 20 years =1592.89 per year.
This then is extrapolated to 5 years i.e. 5x1592.89 = 7964.45

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