Pre-Construction Costs

[Sudhir]

Hello:

I have a client that constructed a medical building for his medical practice and incurred pre-construction costs such as engineering, architect and legal fees prior to construction. Can these costs be amortized over 15 years? Also, do the recent repair regulations apply to new buildings so that some of the building components can be depreciated faster than the 39 years allowed for commercial buildings? Thank you for any feedback.

[Roland Slugg]

... pre-construction costs such as engineering, architect and legal fees prior to construction. Can these costs be amortized over 15 years?

No, they are all part of the capitalized cost of the building.

[Sudhir]

Hello:

I have a client that constructed a medical building for his medical practice and incurred pre-construction costs such as engineering, architect and legal fees prior to construction. Can these costs be amortized over 15 years? Also, do the recent repair regulations apply to new buildings so that some of the building components can be depreciated faster than the 39 years allowed for commercial buildings? Thank you for any feedback.

Thank you Roland. Appreciate your feedback.

[Taxmanrichard]

What happens if the Building isn't built

I have a client that has invested over 10K in pre construction costs in an attempt to get plans approved by the city for an addition to an existing building housing a business. The costs include architect fees, engineering reports, plan reviews etc.) Everything I find talks about adding the costs to the basis of the finished building. What happens if the construction never happens? At this point its questionable if the city will approve the plans. Do the costs become an expense for the year paid since there will be no building to add the costs to the basis? Or do the costs become a loss in the year the city denies the construction? Expenses were paid over a two year period in 2016 and 2017.

Thanks for any information

Richard

[Burke]

Nether an expense nor loss. They are added to his cost for the land. If and when the land is sold, they are part of his basis.