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I work for a large company. They are showing a loss this…

Hi I work for...

Hi I work for a large company. They are showing a loss this year because they did some remodeling and refinancing. The tax preparer insist they have to take 50% of the remodeling expenses and setup the other 50% to depreciate over 15 years. She is not showing the loan fees at all on the return. Not as a held over expense or setup to amortize. Is this right?

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Customer reply replied 1 month ago
The upfit/remodeling I referenced above is NOT the reason for the loss. They had other expenses - interest, paving, and a penalty for paying off an old loan early and refinancing it. Which she expensed 100%. This is a large shopping center complex.
Answered in 1 hour by:
3/15/2018
Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,034
Experience: Adjunct Professor
Verified

Hey! I'm Carter, I'm a CPA and can help you out.

She's right. The remodeling needs to be capitalized and then depreciated. What she's doing is bonusing the costs. You get 50% bonus and the rest is depreciated. Any costs incurred after 9/27/17 can be bonuses at 100%. Anything not bonused would be depreciated over 15 years as a leasehold improvement.

The loan fees should be broken out from the remodeling and then amortized over the life of the loan.

Let me know if you need anything else. If not, please leave a rating. Thanks!

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Customer reply replied 1 month ago
They are showing a loss without the 50%. The 50% bonus is not needed and happened before 9/27/18.Also, the over 300,000 loan fee is NOT on the return at all.

They can have bonus and still have a loss. Only 179 does not allow you to generate a loss or increase loss. So, that's fine. Might as well do the 50% bonus. It'll generate an NOL they can carry back or carry forward to offset past or future income. That's better than waiting 15 years to get the benefit of that full deduction.

She's probably grouping the $300,000 loan fee in with renovation. She should separate it out and amortize over the life of the loan.

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Customer reply replied 1 month ago
Again. The loan fee is NOT on the return at all!! She said she pulled it out to use later. She’s told me it is not on the return. At one point she had it to be amortize. She has made so many mistakes and sent me so many pdf files to review. She is not a CPA which is how she presents herself. I do not trust her judgement.Back to the upfit. They are planning to sell the shopping center at over 25m+. The upfit would help with the cost basis. They are showing losses in other investments and do not need the deduction. Getting back estimates without the 50% upfit deduction. It seems to me it would benefit them more to keep the cost basis higher. She knows all this too.

That would make sense then to avoid the depreciation recapture. You need to do an election in order to not take the bonus depreciation. It sounds like you need to get a tax preparer that is a CPA and knows what they're doing. You can have a much better relationship and everything goes better when you have an adviser you trust.

Let me know if you need anything else. If not, please leave a rating so I get credit for helping you out. Thanks!

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Customer reply replied 1 month ago
Carter. Please address the loan fee. Can it just be omitted completely? The cost was incurred in 2017.Second year working with her and believe me I’m pushing hard to go to a CPA firm!!

No it cannot be omitted.

It needs to be on the return and amortized over the life of the loan in the year the cost was incurred.

Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,034
Experience: Adjunct Professor
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Customer reply replied 1 month ago
Thank you so much Carter!!
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