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Depreciation of legal and architect and engineer fees for a…

Depreciation of legal and...

Depreciation of legal and architect and engineer fees for a commercial real estate property. Is it a capital improvement of 39 years and can it be bonus/accelerated ?

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Have a commercial real estate and have legal ,architect and engineer fees. is that a cap improvement of 39 and can that be bonus or accelerated depreciation

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Answered in 16 minutes by:
5/11/2017
Matthew Breecher
Matthew Breecher, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 287
Experience: Director of Advisory & Assurance
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The legal, architectural, and engineering costs are all to be capitalized with the building. However, you can perform what is called a Cost Segregation Study and breakout all the individual costs, which would include the allocation of the aforementioned costs to the "segregated" assets and them depreciate all the individual assets accordingly. This would give you assets with fewer years to depreciate, such as HVAC/R system, lighting, pavement/parking structures, etc.

...

Have you considered doing a cost segregation?

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Customer reply replied 1 year ago
but for right now just have legal, architectural, and engineering costs are all to be capitalized . Can I use bonus or accelerated depreciation ?

Not with those expenses; they are part of construction costs along with interest, property taxes and other related items until the building is places in use.

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Customer reply replied 1 year ago
The building is in use . we are expanding the property of that make a difference

Expansion would be its own unique project subject to the same capitalization rules. If the business is already active, you might have some room based on how the invoices were prepared, and their wording, to classify part of say legal as a current expense. But you would have to be careful if you take that aggressive approach.

Matthew Breecher
Matthew Breecher, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 287
Experience: Director of Advisory & Assurance
Verified
Matthew Breecher and 87 other Finance Specialists are ready to help you
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Customer reply replied 1 year ago
Understood

No problem and thanks for the positive rating. Upon complete, do the cost segregation study if there is enough to the addition as can really help accelerate depreciation on a construction project.

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