1. Home
  2. Taxes General Forum
  3. Home with ground lease

Home with ground lease

I purchased a vacation rental property in 2014 in Delaware. The house has some reportable rental income and I am trying to determine what the basis for depreciation is. The house has a condo association and was subject to a 100-yr ground lease. Most owners do not payoff the ground lease but rather pay a small annual lease payment for their use of the land. They do NOT own the land. My bank would only agree to provide me with financing if I paid off the ground rent which means that I own the land underneath my house. Say I paid $500k for the house and a separate payment of $10k to pay off the ground rent, what is the amount of my depreciable basis? Is the $10k the value of the land? My accountant is amortizing the $10k over the remaining life of the lease (90 years) and depreciating the entire $500k over 27.5 years. What do you all think?

Reply to
Susan B.
Loading thread data ...

It sounds like you do NOT own the land under your house. You have fully paid up the rent over the remaining 90 year term of the ground lease. Sounds like your accountant is doing it correctly.

Did you get a discount (or avoid escalations) by paying 90 years of ground lease payments in a lump sum?

Reply to
Pico Rico

Land isn't depreciated, the building is. So if you in effect paid $10,000 to own the land, you don't depreciate that. The balance was to purchase everything other than the land, so you can depreciate the entire amount.

In short your accountant is correct on the $500,000. If you own the land I don't think you can write that off at all.

Reply to
Stuart A. Bronstein

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.