Storage land for self-employed trucker

[mcb39]

One of my trucker clients recently purchased 4 acres of land for $150,000 for the sole purpose of having a place to store his tractor and trailers.  He has a contract with a local paper mill and commutes about 60 miles every day to pick up his tractor and then hauls all day for the mill. 

My dilemma is (since you cannot depreciate land) how do I deduct the expense of the land from the business income.  He really needs the deduction.  Is Amortization a possibility or is nothing possible?  It is zoned commercial if that helps and this is the only use of the land.  Please advise.

[Lee B]

You can depreciate Land Improvements perhaps a driveway or a graveled parking lot.

You can deduct maintenance.

Curious investment since he could have rented parking space for a few hundred dollars a month which is deductible.

[Patrick Michael]

Thinking out loud here...if the business is a C or S Corp or partnership and the land is personally owned, could he "rent" the land to the business entity, at FMV?  He would have to report the income and expenses on a Sch E, and could not take a loss, but at least he would be able deduct it on the business side.  

[Lee B]

31 minutes ago, Patrick Michael said:

Thinking out loud here...if the business is a C or S Corp or partnership and the land is personally owned, could he "rent" the land to the business entity, at FMV?  He would have to report the income and expenses on a Sch E, and could not take a loss, but at least he would be able deduct it on the business side.  

Wouldn't the rental income on Schedule E only offset the rental expense on the business entity.

[BulldogTom]

27 minutes ago, cbslee said:

Wouldn't the rental income on Schedule E only offset the rental expense on the business entity.

Reduces SE tax.

Tom
Longview, TX

[mcb39]

7 hours ago, cbslee said:

Curious investment since he could have rented parking space for a few hundred dollars a month which is deductible.

Not curious at all when you know the story.  He was already renting the land.  Seller (who  is also a client of mine) wanted to sell.  Buyer wanted to buy.  Land is worth every bit of what he paid for it.  This trucking operation is his only source of income and the income is healthy.  He needs the deductions.  Help me Here!

Edited July 1, 2022 by jklcpa
moved response to outside of quote box

[DANRVAN]

2 hours ago, mcb39 said:

He needs the deductions.

Bare land is not deductible.  

Interest and property taxes are deductible. 

[Patrick Michael]

19 hours ago, cbslee said:

Wouldn't the rental income on Schedule E only offset the rental expense on the business entity.

What Bulldog Tom said!

[mcb39]

But, could he still be able to deduct the interest and taxes from the C or would he have to deduct it from the E?

[Abby Normal]

4 hours ago, mcb39 said:

But, could he still be able to deduct the interest and taxes from the C or would he have to deduct it from the E?

If it's a schedule C he can't rent personally owned land to the the Sch C. All related expenses would be on the Sch C and there won't be a Sch E.

[DANRVAN]

On 6/30/2022 at 10:33 AM, Patrick Michael said:

Thinking out loud here...if the business is a C...........would have to report the income and expenses on a Sch E,

Not if you are going to comply with the tax code.  See section 162(a)(3),

 

5 hours ago, Abby Normal said:

All related expenses would be on the Sch C and there won't be a Sch E.

Exactly.

[Max W]

Four acres is a lot of land.  It's the size of about 3 football fields laid side to side.

He could rent spaces to other truckers,  or subdivide the land and sell of chcunks of it.