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UK Leashold extension fee - depreciation

ptax255
Level 5

Hello, client owns UK rental property for which he paid a leasehold extension fee, to extend the lease from the government another 99 years. How should this payment be depreciated?

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4 Comments 4
BobKamman
Level 15

Vacant land? Commercial?  Residential?  Depreciate it, as though it were a purchase.  There are still some of these 99-year leases in the US (I used to have a client with a percentage interest of one in DC).  

ptax255
Level 5

Residential. Do I depreciate over 40 years as foreign property, or over 99 years?

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George4Tacks
Level 15

I would use amortization for 99 years. IRC 178 for lease amortization. 


Answers are easy. Questions are hard!
sjrcpa
Level 15

I think Bob is correct.

Somewhere in my memory of Accounting 101 a 99 year lease = ownership.

So it would be 40 years, if it is depreciable at all. 


Ex-AllStar