commercial unit with upper residentail lad ?

[michele]

I have a commercial property  rental that I am working on that is divided into 3 units. 2 lowers spaces with different  commercial tenants, That I would allocate land to.  The upper unit is residential would a portion of land be allocated to this unit also? Maybe I am overthinking or is it the April 17th brain fog. Just because it is the upper unit I would not think that it would be negated from land.

[IRonMaN]

I think you are overthinking it.  As long as you have land allocated to the lower units, I wouldn't be too worried about splitting hairs and adjusting the depreciable portion for all of the units.

[BobKamman]

Or are you underthinking it?  The first step is to consider the whole building.  You paid $100,000 for it and you figure the land is worth $10,000.  From there, allocate the $90,000 but don't say upstairs residential is worth the same as downstairs commercial.  Are they all the same square footage?  Is there an elevator?  (Maybe use component depreciation here.)  Could very well be that each downstairs unit is worth $35,000 (how much rent do they earn?) and upstairs only $20,000.

In other word, don't start by dividing the building into pieces and then put it back together.  Determine the value of the building, then allocate its parts.  Your software might ask for the value of the land, but IRS doesn't ask until the place is sold, or the Schedule E is audited.  

Interesting question would be, what if it's turned into a condo?  

[michele]

I already took the  building as a whole into consideration and land amount then I moved onto   it's parts as to how the rehab played out for each section and amount. for this piece of property but wanted to allocate the land  properly. If you knew how many 3115's I have done this year and last that were brought in an prepared by other CPA"s for residential and commercial rentals with absolutely no deprecation taken and they are getting ready to sell. What a dis service to have to have depreciation recapture on property that they never been depreciated because the owner did not know. I have one's on extension waiting on 3115's to be prepared. I like my returns prepared properly and  and not wait for an issue that may or may not arise with the IRS. Depreciation audits can become nasty.

Thank you for your input.

Michele

[michele]

Thx

That is what I am leaning towards.

Michele