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Qualified L/H Improvements for a Plaza

Technical topics regarding tax preparation.
#1
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I have a client who owns a shopping plaza. Plaza opened mid 2017. 2019 Client gave buildout allowances for several new tenants that moved in.


Do the allowances qualify as qualified leasehold improvements under the new rules for 179 and/or bonus depreciation?

Some where in the back of my mind I recall something about the building having to be at least 3 years old?

Thanks
 

#2
Coddington  
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It's called Qualified Improvement Property. It was rolled out as part of the PATH Act to determine whether leasehold or tenant improvements qualify for bonus depreciation. It eliminated the 3-year rule that determined whether an improvement was Qualified Leasehold Improvement Property. Post-2017, it also can be used to identify some of the Qualified Real Property eligible for section 179 expensing.
-Brian
Tax accounting methods and credits consultant for hire.

http://www.coddingtontax.com
 

#3
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Thanks for the response. I knew that there was the 3 year rule at one time. Wasn't sure if it was repealed under the new rules
 

#4
Noobie  
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Would that allowance be a reduction in rental income, and not a leasehold improvement if the owner of the plaza is not paying the contractor directly?

Are the leasehold improvements the property of the plaza owner when the leasee vacates the premises?
 

#5
Coddington  
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If the lessor is the owner of the resulting assets or the allowances fall under the section 110 safe harbor, the lessor capitalizes them. They could be lease acquisition costs included in the lessee’s income and amortized over the lease term plus renewal options if the lessor doesn’t own them.
-Brian
Tax accounting methods and credits consultant for hire.

http://www.coddingtontax.com
 


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