View Easement

[appelman]

A client has a rental property. Her neighbor had a tree that was blocking the view. The neighbor agreed to remove the tree at his expense and to provide a permanent view easement for a fee of $10,000, which was paid. This clearly seems like something to be capitalized, but should it be a non-depreciable part of the land, or a 27.5 yr -depreciable improvement?

[Gary2]

If this were a landscaping improvement at the edge of the property, away from the building, it would not be depreciable. There might be some reg or condition unfamiliar to me that could imply some other treatment, but my intuition is that it can't be depreciated.

[Gene V]

You might consider 15-Year Property—Land improvement-see TTB 9-9 for description.
Or maybe part of the expense for land improvement.

[OtisMozzetti]

A client has a rental property. Her neighbor had a tree that was blocking the view. The neighbor agreed to remove the tree at his expense and to provide a permanent view easement for a fee of $10,000, which was paid. This clearly seems like something to be capitalized, but should it be a non-depreciable part of the land, or a 27.5 yr -depreciable improvement?

I have to say that it sounds to me like this is the cost of changing land which offers only a blocked view into land which will have, per the easement, a view permanently. As such it is the cost of land, which is not depreciable. Maybe the cost which was an indirect payment for the cost of removing the tree is a land improvement cost, depreciable over 15 years; but since that amount cannot be known I would say it all has to be considered land period. The agreement with the neighbor could just as easily have been written to say that the cost of tree removal would be paid, plus $X000 would be paid for the easement.

[Davc]

I have to say that it sounds to me like this is the cost of changing land which offers only a blocked view into land which will have, per the easement, a view permanently. As such it is the cost of land, which is not depreciable. Maybe the cost which was an indirect payment for the cost of removing the tree is a land improvement cost, depreciable over 15 years; but since that amount cannot be known I would say it all has to be considered land period. The agreement with the neighbor could just as easily have been written to say that the cost of tree removal would be paid, plus $X000 would be paid for the easement.

Agree........

[appelman]

Thanks for all responses.

I have come to agree with the predominant opinion that it is a non-depreciable addition to basis of land. In support of this, I have also found:

"The purchase price of an easement cannot be depreciated or amortized because an easement does not have a definite useful life."

This is attributed to Reg. Section 1.61-6 (a), but I think the attribution may not be right.

[OtisMozzetti]

Land improvements such as a parking lot all do not last forever. In contrast, the view easement was to be "permanently" there. That is why I believe it is non-depreciable.