Disposal Cost

[jshtax]

What options are there for disposal cost now under new repair regs?

[Lee B]

You don't say what the disposal costs are related to?

 

It's a facts and circumstances decision.

 

For example, under the new regs :

 

1.  Disposal of contaminated soil or remediation of other contaminants usually are required to be capitalized.

 

2.  Disposal of construction debris from tear outs in preparation of leasehold improvements usually is capitalized

[jshtax]

here it is. 4-5 years ago client bought a building and land. it was setup as 450K land and 250K building. After 3-4 years of rental and last tenant moved out he has decided to partially tear down building and do a custom rebuild for new tenant(20yr lease). What happens to the undepreciated cost of building? Abamdonment? Disposal? Added back into land cost? 

[kcjenkins]

If it's a "partial tear down" I would include the remaining building basis in the total building basis and continue depreciating it.  

[BulldogTom]

I would add a new asset and keep depreciating the old asset.  Add the cost of the teardown into the new part of the building and start it depreciating from that point, but leave the rest of the depreciation alone.

 

Just my 2 cents.

 

Tom

Newark, CA

[jklcpa]

For what it's worth, the text below is from pub 551 updated 12/2014, so presumably this takes into account the new repair regs:

Demolition of building. Add demolition costs and other losses incurred for the demolition of any building to the basis of the land on which the demolished building was located. Do not claim the costs as a current deduction.

Modification of building. A modification of a building will not be treated as a demolition if the following conditions are satisfied.

 

• 75 percent or more of the existing external walls of the building are retained in place as internal or external walls, and
• 75 percent or more of the existing internal structural framework of the building is retained in place.

If the building is a certified historic structure, the modification must also be part of a certified rehabilitation.

If these conditions are met, add the costs of the modifications to the basis of the building.

[jshtax]

Thanks!