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NE Ohio | I try to break out as many of the depreciable items mentioned above whenever any of my clients purchase land. Easiest way to do this is have appraiser put values on structures and land separately. They normally don't put a value of tile so I try to use a reasonable estimate per acre based on age of tile and spacing. I would also suggest looking at timber value in case a property would have marketable timber on it. If a person has plans to harvest the timber after purchasing it then they could use the established timber basis to offset proceeds. This would typically require an appraiser who specializes in timber. Most appraisers working for bank won't be able to do this. Lastly, if a person is in an area with productive oil & gas activity, I would consider determining value for mineral rights as well. Like with timber example, if a person decides to sell mineral rights down the road, you could use some of the establish cost basis to offset proceeds received.
All of these provisions would also apply to real estate that receives a basis step up at someone's death. If accountant didn't bother to allocate land cost amongst various asset groups discussed in this post when property was first purchased, then you can do it as part of basis step up calculation. | |
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Buying land and the income taxes
