How to delay depreciation until you sale the building?

[ginamhayes01]

I only rent the land. The building is "falling" in and I have not depreciated anything for a while. I will recapture the depreciation when I ever sale the land. So how can I make Turbo tax not depreciate anything but keep the history?

[Carl]

If you're only renting out the land, and not the building, then why are you including the cost of the building in the assets/depreciation section? 

If the building was rented in the past, then it's a matter of removing the building from service and keeping the land in service. This is a bit tricky to do with TurboTax. But it's doable.

First, show the entire property (building and land) converted to personal use at least one day after the last tenant moved out.

Next, make a second entry in the assets/depreciation section for the land only. Make the in service date for this new entry at least one day after you removed the property from service in the prior entry. Adjustments for depreciation are not necessary here, since the land is not depreciated anyway.

Both entries in the assets/depreciation section will remain there until such time that you sell or otherwise dispose of "at least" the structure.

[ginamhayes01]

Originally there was a business on the property. The business closed and the owners started a solar farm. The buildings are actually falling and can never be rented again. This is why it is still on the books. What do you think ... should I write out the building and recapture depreciation? I thought you have to actually sell the property before you can do this ? 

[Carl]

If my assumptions are wrong, please correct me, as wrong assumptions means the information I provide you may also be wrong.

Originally there was a business on the property.

So am I correct in assuming you did not own the business? Instead, some other business owner rented the property from you for their business?

The business closed and the owners started a solar farm.

Wait I minute. The "owners"??? owners of what? The property? I thought you owned the property. If you do own the property, are you now renting out the land to another business owner that owns some kind of solar energy production business?

The buildings are actually falling and can never be rented again.

Does the county property appraiser still have those buildings included on the property tax rolls? If so, I would highly suggest you get them razed and removed. Then request an updated tax appraisal on the property. That will lower your property taxes quite significantly. Additionally, the cost of razing and removing the buildings can be declared a land improvement, thus adding to your cost basis in the land. On top of that, once the buildings are actually removed, any remaining depreciation not yet taken on the buildings gets added to the cost basis of the land. That too will decrease that taxable gain on that land, when/should you sell it in the future.

 I thought you have to actually sell the property before you can do this ?

You are correct. But not just sell. You have to sell or "otherwise dispose of" the asset to take it off the books. If you have the buildings razed and removed, that's a disposal. The cost of that gets added to the cost of the land, and the cost of the not yet taken depreciation also gets added to the land. That means when you do sell the land in the future, you will not pay any taxes on the total land cost basis. That's when you get to actually "realize" the losses on your disposed asset.

One thing I should point out about the disposal costs of the buildings. Above I said add those costs to the cost basis of the land. You can do that. But depending on your specific circumstances you "may" also be able to declare it a rental expense. Though I would not suggest that, it may be an option depending on your situation.