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Max Online: 16728 @ 03/25/12 08:51 AM
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#6483545 - 10/06/16 09:41 AM Breaking out the cost of fences, barns, etc when buying land?
Mr. T. Offline
Veteran Tracker

Registered: 11/05/14
Posts: 2246
Loc: Hunt in Cass County, live in T...
I was told that I should when buying land: Break out all of the improvements for tax purposes.
Property cost $100,000 and is fenced and has one barn.
I should offer $80,000 for land, $10,000 for fences, $10,000 for barn.
That way I can depreciate the cost of the improvements...fence & barn.
Is this correct because if so I have been doing it wrong several times.
Ski cabin rental in Pagosa Springs.

#6483847 - 10/06/16 12:56 PM Re: Breaking out the cost of fences, barns, etc when buying land? [Re: Mr. T.]
Rockhunter Offline

Registered: 07/23/09
Posts: 152
Loc: East of Dallas
The allocation between land and depreciable property is all based on facts and circumstance.

For example, if you bought 100 acres in Collin county for $100k (which would be the deal of the century) with a 35 year old wooden barn that was completely worn out and 4000ft of rusty 35 year old 5 strand you should probably allocate next to nothing for the barn and fence and allocate all the value to the land.

If you flipped the situation around and were buying 10 acres in Collingsworth County and it had a 2 year old 4500 sqft metal barn and 1700 feet of high fence and paid $100k for all of it. The land value might be next to nothing and the depreciable property might be almost all the value.

The good news is you are in the world of valuation which the IRS knows is not black and white. Generally speaking on areas like this if you use common sense and don't go crazy you will probably be ok. Anything you can get to document how you arrived at your values you should keep for 6 years from the date of purchase. This might include appraisal reports, age of buildings and fences or at least pictures of depreciable property, any comparable sales in the area that show land that sold that had no improvements, etc.

Hope this helps.

#6493346 - 10/12/16 11:49 PM Re: Breaking out the cost of fences, barns, etc when buying land? [Re: Mr. T.]
Burton Ranch Offline
Light Foot

Registered: 05/21/12
Posts: 47
I would second rockhunter (documentation is key). The appraisal will also be valuable when determining the amount of insurance required for buildings, etc. I am sure you are aware of this, but it is also very important to keep the property taxed at ag value. If you let this laps it takes a few years to get it back and the taxes are considerably higher. Best of luck with your purchase.


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