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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12443
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I have leasehold improvements on my depreciation schedule

Customer Question

I have leasehold improvements on my depreciation schedule from 2014 ($568k) and from 2014 ($33k), which are both depreciation straight line over 39 years. It seems that the accelerated depreciation may apply to me but would like clarification. The area improvement is an office space within a non residential building. There was no improvement to any common area or structural. There is no relation between the tenant and the landlord. The improvements are in conformity with our lease. It seems to me that I can accelerate the depreciation by 24 years. Am I eligible for the bonus depreciation?
Submitted: 4 months ago.
Category: Tax
Expert:  Lane replied 4 months ago.

That's right ... It's not accelerated, however, (just talking semantics here), This simply qualifies for a 15 year class life. (Straight-line)

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Technically ACCELERATED would be DDB, Section 179, bonus, etc. something other than straight line.

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The leasehold improvements you've described are 15 year straight-line items.

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To be a leasehold improvement, the work you do needs to meet three tests. First, it must be done by the landlord or the tenant of the space. Second, the work needs to be completely contained within the walls of the tenant's space and must not impact or benefit other tenants, the building's common areas or the building's structures. Finally, the building must have been in use for at least three years.

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And yes this qualifies for 50% bonus depreciation as well.

Expert:  Lane replied 4 months ago.

Please let me know if you have ANY questions at all, before rating me.

I hope you’ll rate me (using those stars, or faces on your screen, by clicking submit) based on thoroughness and accuracy, rather than any good news / bad news content.

Otherwise I’ll receive no compensation for the time & expertise here at all, from JustAnswer.

Thank you!

Lane

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I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice to clients on three continents since 1986

Customer: replied 4 months ago.
Thank you for your prompt response. The work performed meets all criterias of the three tests. So for my 2016 return, I should change the deprecation for these 2 leasehold improvements from 39 to 15 years and can take the 50% bonus depreciation, less the value I took the depreciation for on my 2015 return? One leasehold improvement was put in place in 2014 and the second in 2015.
Expert:  Lane replied 4 months ago.

I would do an amended return for 2014 and 2015.

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The statute of limitations for filing an amended return for a refund is three years (three years from the due date for the return, so April for 2018 for the 2014 return due in 2015, and 2019 for the 2015 return due in 2016)

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The reason for this is so that you will be correcting it from the beginning (as opposed to having to do the VERY complicated form 3115 to ask for an accounting method change).

Expert:  Lane replied 4 months ago.

Please let me know if you have ANY questions at all, before rating me.

I hope you’ll rate me (using those stars, or faces on your screen, by clicking submit) based on thoroughness and accuracy, rather than any good news / bad news content.

Otherwise I’ll receive no compensation for the time & expertise here at all, from JustAnswer.

Thank you!

Lane

..

I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice to clients on three continents since 1986

Expert:  Lane replied 4 months ago.

Did you see my answer?