Soft cost depreciation?
When determining the appreciable base of a newly constructed residential building, different components are treated differently. I know through cost segregation personal property and other things can be on an accelerated schedule of 5 years, but how are soft costs like architectures fees, developer fee or legal fees treated?
Example:
Project Cost $10,000,000 Land - $1,000,000 Depreciable Base : $9,000,000 Personal Property: - $500,000 (to be depreciated on a separate schedule)
The $8,500,000 now includes hard and soft cost, is one now "free" to depreciate this over a 27.5 year schedule theoretically?
I was not aware you could depreciate developer fee.
I'm not saying you can, that is the heart of my question.
You depreciate the value of the improvements which is not always determined by the cost to build them. You can use several methods to determine value of the improvements; tax assessors split it out for you and appraisals are probably the most accurate. I'm pretty sure you can also use insurable value. I don't think you can use a BOVs since they don't break out land value.
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I am not sure about that either but cost segregation studies segregate real estate costs into different asset classifications and recovery periods for federal and state income tax purposes.
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