Thread: Land and Appraisal

Why is the appraisal cost not added to the cost of the land? Thanks.

I am not 100% sure about this but I think it is because that just because you appraise an asset doesn't mean you will buy it. Appraisal could be for any number of reasons.

"Land" is not depreciable in the parlance of taxation. However, Real Estate is a
depreciable asset. And, Real Estate is not a service, service is not real estate.

Segreagation of expenses relating to Real Property, especially commercial property,
requires allocation of expenditures to maintenance, purchase expense and so on...

Why?
Because trolls like me will attempt to allocate a KAGILLION $$$$$ to the land owned
by partnerships or trusts and distribute K-1s with depreciation related losses to persons
with Buku Bucks, in colorful layman's terms.

Example:
ABC, LLC purchases a $1 million commercial building from related subsidiary 123, LP. Included
in the purchase agreement is the assumption of a contract to install geological "eco" devises
to detect radon gas and emissions from a landfill dating to the 1950s. ABC, LLCs valuation includes
expense of service contract as "real estate" and depreciates accordingly.

Potential Effect:
Partners may receive 1065 K-1s reporting losses for 30 years, and, value of real
property is manipulatable relating to local property tax purposes. Little known statistic, real property
preferred in partnership form to corporations for loss/depreciation benefits.

Assets are recorded at cost. Here you purchase an asset and incur a transaction cost. These costs though necessary to complete the transaction do not improve the underlying asset itself.

They are often expense items required for financing or prudent due diligence but sometimes capitalized in a separate category and amortized.

Here the pertinent category would be prepaid loan costs where several costs are gathered together (points/fees, legal costs, surveys, and appraisals) before being expensed over the loan term.