farm land purchased

[Unregistered]

Farm land was purchased for 150,000. Tile that is included in the 150k was valued at 22,800. Because the tile was in place before the purchase of the land can we break out the cost and depreciate?

Thanks

Bucky

[JG EA]

Tile?

If you mean some attachment to walls of a building, then depreciation would depend on if the building was used for business.

If you mean a pile of tile then it could perhaps have a separate basis but not be depreciated.

Unless you use the tile to make a path for the cows so they won't get their feet wet - then it could be depreciated.

[cpadan]

The tile is a land improvement used for draining. Yes, allocate and depreciate along with other improvements and equipment that might have been purchased.
Dan

[Jiggers]

Allocation of asset purchased

I would have the client provide the allocation.

Also don't forget any fencing or pens, cattle guards, gates, feed troughs, anything identifiable except land.

Start with the $150,000 plus the closing costs, deduct depreciable items, and the balance is the cost of the land that is not depreciated.

I do this all the time. I do it also for rent houses purchased if there are furniture and fixtures such as stoves, refrigerators, washers, dryers, etc. included in the purchase price.