§754 basis adjustment on Qualified Improvements

Technical topics regarding tax preparation.
#1
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If we are making a §754 basis adjustment in 2018 and one of the assets is a Qualified Leasehold Improvement placed in service in 2016, would the basis adjustment use the 15 year life or 39 year? I don't work much with these, but it is my understanding that the basis adjustment should use the same depreciation method and life as the original asset. But of course we are now stuck with 39 year rather than 15 for this type of asset.
 

#2
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You are making (or have made) a 754 election.
You will be making a 743 (partner to partner) or 734 (partner to partnership) adjustment.

Current year rules for lives/methods must be applied. Looks like you will have 39yr for this adj. Remember, though, you may be able to take 179 on it though.
~Captcook
 

#3
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Thanks for the quick reply Captain!

Regarding 179, this old discussion from our predecessor indicates that 179 is not available on the basis adjustment. Has something changed since then?

http://www.taxalmanac.org/index.php/Discussion_Partnership_Sec_179.html
 

#4
Coddington  
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The proposed bonus depreciation regulations provide that a transferee partner is able to claim used bonus depreciation on the 754 step-up (at least for the portion of property the partner has never used before). To do this, the taxpayer must meet the purchase requirements of section 179(d). Since this is allowed, the purchase requirements of section 179 must not generally prohibit section 179 on 754 step-ups. But, unlike with the proposed section 168 regs, there is no specific provision limiting this to portion of the property not previously used by the transferee. We could infer that the same rule applies, but I'm not sure.
-Brian

Director of Tax Accounting Methods & Credits
SourceAdvisors.com

Opinions my own.
 

#5
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Good discussion...I always enjoyed Kevin's contributions.

This is also why I said "may" above. I couldn't recall off-hand, but know that 179 is available for 39yr property for the first time this year.

I would agree with the conclusion reached in the discussion. No 179 election available because the basis of the property in the new partner's hands is determined by reference to the basis of the property in the partnership's hands.
~Captcook
 

#6
Coddington  
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But that rule can’t apply because it would also rule out the availability of bonus on 754 step-ups and it does not.
-Brian

Director of Tax Accounting Methods & Credits
SourceAdvisors.com

Opinions my own.
 

#7
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Good point.

I don't have time to look it up right now.
I hope you let us know what conclusion you come to, NS.
~Captcook
 


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