Value of land vs building depreciation

[febroker1]

My sister and I purchased a leased commercial property last year.  I'd like some help in determining the value of the land vs the building for depreciation purposes.  According to the county, the land is assessed at a higher value than the building and both figures are far below the purchase price.  The value is actually in the lease.  Is a lease depreciable?  Should I just go with the 80/20 suggestion giving the building 80% of the value of the purchase price?  Want to get this started with the right number.  Thanks!

[Mike9241]

please clarify what you did.  you say you purchased a leased property. if so, the lease would only affect the rent you can charge and has nothing to do with the depreciable basis.  get an appraisal from a realtor in your area.

any split can be challenged by the IRS so having a written appraisal would help.

[febroker1]

Yes, we purchased an income property.  Value based on a cap rate. I did contact a local Realtor and had a market analysis done.  Thank-you!

[DianeW777]

The market analysis can be used to determine the portion of the purchase price and purchase expenses that apply to each, land and building since you believe the tax assessment records are not an accurate reflection. Keep the analysis in your tax records to show how you arrived at your depreciable basis for the property (land and building).

Take the total market value then divide the portion for land against the total market value and do the same for the building.  Use these percentages against the purchase price and purchase expenses then combine them for the total cost for each asset.

[febroker1]

Diane,  I have gotten a market analysis but did not think to attribute the percentage of expenses  between the land and the improvements.  Thanks for the tip!!