MH And Land Package Depreciation Q
I am about to close on a Land/Mobile Home package - small lot, separate 2/1 SW (1977), 3 bedroom septic, outbuildings. The escrow office wants to know the value I'd like put on the bill of sale for the MH.
Anticipated "exit" - initially repair and rent the SW, eventually to be replaced by a DW, then there are other possibilities: Lonnie the MH and rent the lot, sell the whole thing, continue to rent, . . .
What is the best way to "value" the SW for the buy part of this deal? Higher? Lower? Justification?
UPDATE: Got looking closer - the MH is still titled, so there is a separate tax account - the real property tax account shows land value of $XX,000, and improvements of $7K - - - but the separate MH tax parcel shows an appraised value *of the MH only* as $20K!!!
So . . . . . start depreciation on this year's taxes by breaking out personal property other than the MH (carpet, appliances, furnace, etc) with the remainder of 20K to the MH, and on the real prop, break out the septic and outbuildings, sidewalks, driveway, etc to be depreciated from a value of 7K, whereas the remainder of the land cannot.
Since these numbers can be backed up by county records, do I not have a good basis for value on purchase from which to depreciate?
But the REAL value on the MH is squat, so I will challenge the county AFTER the purchase, get it reassessed, and lower the annual tax bill.
Is this the kind of thing we do to turn the tables on the IRS - within legal allowance?
I say - oh, yesssssssssss.
Opinions please . . .
The general rule is that your initial depreciation basis is what you actually pay for the asset -- not what the tax assessor thinks it is worth.
If you only pay $7K, then that is your cost basis for depreciation even though the tax assessor has a higher tax valuation.
Perhaps someone in the Mobile Home Forum deals with this issue all the time and can give a more complete answer.
Dave T
I am buying the package, and there is no delineation of hopw much is the MH and how much is the land. The only thing that does, is the county assessment. The 7K is for improvements to the land, not the MH, which has its own separate parxcel number - title never dissolved/no foundation.