I've hit a roadblock in my research on the use/abuse of TIFs. I've asked some professionals the below question, however, none were willing to answer or gave me conflicting answers.

The question: What is the GAAP basis for depreciation for the new owner of a commercial building purchased out of foreclosure? Say, a building built for $1 million having a 15-year depreciation schedule that at three-years-old is purchased out of foreclosure for, say, $500 thousand. Is the basis for the new owner still the original $1 million or the $500 thousand?

I've tried to answer this myself, but have not been able to filter out the myriad of non-related results associated with "depreciation."

Thank you.


The foreclosure and the original building costs do not seem to be relevant.

Property acquired by purchase. The depreciable basis is equal to the asset's purchase price, minus any discounts, and plus any sales taxes, delivery charges, and installation fees. For real estate, you can also include costs of legal and accounting fees, revenue stamps, recording fees, title abstracts/insurance, surveys, and real estate taxes assumed for the seller. Remember you can only depreciate the buildings—land is never depreciable.

Land and building acquired in a single transaction. A business will frequently acquire both land and an office building. In these cases, only the portion of the price that is attributed to the building is depreciable.


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