Building on husband's land

[neilbrink]

Cleint couple have been married 2 years, when they married she moved into his house on his land. Last year, she built with her money, a small building on his land to house a dental laboratory business which she intends to open as a sole proprietor this year. Does she own the building that she can depreciate as part of her business, or does her husband own the building because it is on his land? If he owns it, should he rent it to her and he take the depreciation? What about her funds being invested in the building on the land that he owns? This is in Illinois, not a community property state. This won't affect last year tax return, but I need to give them some advice for this year. Thanks. Neil

[Pacun]

Cleint couple have been married 2 years, when they married she moved into his house on his land. Last year, she built with her money, a small building on his land to house a dental laboratory business which she intends to open as a sole proprietor this year. Does she own the building that she can depreciate as part of her business, or does her husband own the building because it is on his land? If he owns it, should he rent it to her and he take the depreciation? What about her funds being invested in the building on the land that he owns? This is in Illinois, not a community property state. This won't affect last year tax return, but I need to give them some advice for this year. Thanks. Neil

File jointly and problem solved.

[neilbrink]

File jointly and problem solved.

That helps, Pacun. So they should file jointly with her taking the depreciation on the building in her business, or filing jointly with he taking the depreciation on the building as a rental property and charging her rent?

[TaxmannEA]

It's not unusual for someone to build on land that they do not own. We have a community near Galesburg that was established in that manner. She would own the building and could depreciate it for her business even though she does not own the land. It's her asset. (Illinois being a joint and several property state, the distinction is blurred anyway.)