Oskaloosa, Iowa 52577 | I am out of state using a strange computer so please bear with the typos……. I dont understand how to send an email from this machine, so I merely copied ithe intended email to you to here.
I just noticed your post on new ag talk aboutg the building.
Your best comments were those from jakebird….
He was concerned about whether or not YOU would be deemed personally to be a farmer, and therefore would get the special depr rates for building.
‘those rates are not for the tyhpe of person, but for the use to which the building is put………so I would not worry about using the 20yr life.
I don t remember about the 50% additional depr for 2010………..tath was NOT in the new law the HIRE law, that extended the 179 limit to 250K……..so I am not sure about that………but that can b e checked at the IRS website very easily.
The bigger question for you, I think, is who should own the building.
If you personally own the land on which the building is setting, and therefore that building would be sold as part of the land,………….
I would MOST LIKELY (I don’t know all your affairs, etc etc ) let the corp pay for the building, let the corp own the building…….and depr it as a building, owning it as a leasehold improvement.........ie it owns the asset, but loses that ownership when it gives up the real estate it is currently renting..............no different tahn a tenant who puts in a wall in an office building, where it is renting office space. that wall is gone.........ie stays there on landlords premises........when the tenant vacates the property.
Then………if yhou want a way to get money out of the corp……..let the corp pay you rent on the land.
This allows the corp to finance the building with its retained earnings…….thereby giving you a way to get cash out of the corp, in effect, by letting those dollars pay any financing directly………..in addition, in a bad year, the depr and any interest on that building would be contained within the corps net operating loss, which has much more favorable carryback/carryforward provisions than does an individual.
When you decide to sell the land with the building on it, then the building merely goes with the land as a leasehold improvement, (corp gets a full deduction for any undepreciated basis related to that leasehold item which is abandoned when the tenant has to vacate the premises) which accrues to the benefit of the land owner……………so, you personally would sell the LAND, with a value including the building………and get capital gains on the entire sales price, without having to recapture any depreciation on the effective sale of the building.
Even if the corp is an
S corp, I would still do it………….merely due to the writeoff at sale of any underpreciated basis, at ordinary loss……….with a corresponding pickup of the sales price at capital gains rates on the land.
Even if the capital gains law is killed in a year or two………..there would be no damage from that transaction structure………so, you would be at least set up to take advantage of it if it does remain in effect.
Even if you personally paid for th e building, and erected it yourself or had someone do that............you can
EITHER transfer the buidling to the corp via section 351, taking stock or merely making a contribvution of paid in capital........letting the corp depr it................OR......................merely deem the money expended by you to be a loan to the corp, making the pahments on behalf of the corp, and merely collect some interest from teh corp, and have corp pay off the loan just like any banker. since the item is a capital item, corp can still depreciate it as if it paid for it when erected and placed in service, even though it owes you on a long term note..........the same as when buying equipemnt and financing the buy. Rule of thumb................let the corp use its cash for as many thngs as possible............and retain ownership personally only in those items which will aprpeciate in value................in this case, it will be the land under the building, or around the building, that will most likely cause the increase in value, but not the actual physical "old" machine shed or shop building itself. such might enhance the value, but seldom is the structure the root reason for the value.
jakescia
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sfi--------building........
