I want to sell commercial property. what to do with leasehold improvement. do I add back what was amortized. or can I add the full amount to the cost of the building?

[TaxGuyBill]

1) The cost full cost of the Leasehold Improvement is added to the full cost of the Building.

2) The amount you were able to depreciate for the Leasehold Improvement is added to the amount you were able to depreciate for the building.

3) Your "Adjusted Basis" in the building is usually #1 (above) minus #2 (above).


Does that answer your question?  If not, please post back with further details.

[Carl]

"leasehold improvement". I interpret that as you do not own the building, but you pay rent for it. If that's so, then your "cost basis" is what you paid for any property improvements, and that does not include the cost of the building if you don't own the building.

[bobb1]

TaxGuyBill  With the above then if I sell this building for more than the adjusted cost then I would have a taxable gain is that correct. Thank you for your anwser

[TaxGuyBill · Accepted solution]

Yes, you will have a taxable gain.

The depreciation is taxed taxed at your regular tax rate, up to 25%.  The rest of the gain is usually taxed at 15% (but the 'extra' income can affect many other things on your tax return, increasing your other taxes).