I have a client buying a rental property business for $1 million but with only $50,000 in assets. Anyway to depreciate the Goodwill of $950K

[TaxGuyBill]

Can you clarify the situation?  Does does a rental property have Goodwill?  And the rental property (building and land) is only $50,000?

[IRonMaN]

Because it isn't a building, it's a rental property business.  The $50,000 is the cost of the desk and chair that comprise the business assets.  It's kinda like the fine print on something that you buy that needs batteries.  But instead of "batteries not included", it is "buildings not included".

As far as the goodwill goes, check out something called amortization of intangible assets.  Google is a good friend to have at times like these.

[Just-Lisa-Now-]

Rental property "business" like a property management business with a building on it?   You may need to clarify the situation better.

[TaxGuyBill]

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@IRonMaN wrote:

Because it isn't a building, it's a rental property business. 

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Ah, thanks for pointing that out.  I think read too quickly and I jumped over the "business" part. 

[maui doug]

The client is buying a rental property management business so they have around 20 properties they don't own but get 20%-30% of the rental income as their commission from the owners of these properties.

The only hard assets they have is computers, office equipment and a couple vehicles valued at $50K

[qbteachmt]

"so they have around 20 properties they don't own"

That means there is Liability that should be passed over = the tenant prepayments and deposits against move-out or last months' rent. You would not want to treat that as an asset. Is that a net $950k goodwill? Is there cash on hand in a trust account?

"computers, office equipment and a couple vehicles valued at $50K"

That seems pretty high, unless they have lots of vehicles (more than a couple), such as for maintenance or housekeeping staff.

"buying a rental property management business"

So, a book of business? The entire entity? Or, just a customer list, really?

Do the buyers have a decent business evaluator?

[PATAX]

20 to 30% is really a good Commission. In my area it is about 10%. Also you stated there are only 20 properties, so I'm assuming there must be many multi-units in each property. Around here the rental property management companies have hundreds of properties that they manage, but many are probably single unit.

[qbteachmt]

I worked for a ski resort property manager, with 147 units under management (from single-family homes, duplex, triplex, up to multi-unit buildings with pools) and a high-season rental pool requirement and we ran the water system and provided housekeeping and maintenance services (but we charged you for every light bulb other than incandescent, for every replaced blender, toaster, linens, etc) and we would stock your unit with groceries before your arrival and one of our staff drove the kids to school every day and we got paid as a school transportation service and handled the outgoing mail, etc, the same as a small village would need. 30% seems about right in a resort area.