My client has signed a 20 year lease with our local city government for 80 acres of unimproved land. The lease payment is $2,000 per year. He is installing a recreational sporting clays shooting range. He has spent over $175K clearing the land, bringing in utilities, and moving in portable buildings and machinery and equipment to get the range up and running. He is now drawing up plans to build a permanent 2,000 sq ft "lodge" on the property. Cost will be another $150K at a minimum.
What do I need to learn (know) to help advise my client. What red flags do you see?
Are the cost of expenditures that are permanently attached to the land (clearing, utilities, etc) considered Leasehold Improvements. If so how are they depreciated?
Is the new Lodge considered a Qualified Improvement Property? (The city is not restricting the construction in any way)