Depreciation Basis - New Business

[GTS1101]

I have a client who owned a family child care provider business in her second home. She would live upstairs as her residence and then downstairs was the child care area. Her husband lived in their primary residence. We did the home office for several years. In 2006 she started getting zoning permits, land improvements, and plans from the city to add on and expand the building. Oct 1, 2008 she moved out of the home and the entire home and new building became her child care area 100% business use. In 2008 she also changed from a sole proprietorship to an LLC but not taxed as a corp, still files Sch C, and is now a preschool child care center.

For the depreciation on the old building do I stop Sep 30, 08 and then claim the adjusted basis 100% beg Oct 1, 2008? And then do I claim separate depreciation for the new building or do I combine the adjusted basis of the old home and the new building and take one depreciation amount beginning Oct 1, 2008?

Also since she stopped being a sole proprietor and changed her business name and became an LLC and did a lot of expansion can you she claim the start up and organization costs of 5,000 for a new business that she paid before 2008 for the expansion like consultant fees, licensing fees, city business fees, etc? There were a lot of fees paid to the city between 06 & 08 to determine if she could do the expansion.

Thanks!
GTS1101

[Corduroy Frog]

Daytime Only

GTS, I don't know what kind of comments and replies you will get on this topic, but I want to butt in and call everyone's attention to the line 4 (hrs divisor) on Form 8829 for Daycare. This normally serves as a limiting factor.

I don't know whether this applies in your case. Sounds like the business use may approach 50%, but not if they have to factor down by this feature.