Discussion:Abandoned Leasehold & Related Party

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Discussion Forum Index --> Basic Tax Questions --> Abandoned Leasehold & Related Party
Discussion Forum Index --> Tax Questions --> Abandoned Leasehold & Related Party

Msmith7305 (talk|edits) said:

27 December 2007

I have a new client who previously purchased real estate in his own name. Property was rented at FMV to his corporation shortly after purchase. Corporation then proceeded to put in extensive leasehold improvements. This happened approximately 5 years ago. The corporation decided to move in 2007 due to the need for a larger property. Individual purchased a larger facility during 2007 and corporation moved into the new property in August 2007. Individual sold the older property in September 2007. At the time of moving, the corporation had $ 20,000 in basis remaining in the leasehold improvements in the old property. I can find nothing that would indicate that the corp. can not fully write off the remaining basis in the abandoned leasehold costs. Does anyone know of a "gotcha" here?

Thanks for any input.

WesR (talk\|edits) said:	27 December 2007
Hi without looking at anything I dont know of any gotchas. bye

Waynecpa (talk\|edits) said:	27 December 2007
You really should read the related party transaction rules in section 267 and 707. Without doing the detailed research, it seems to me that you may have a constructive dividend of the abandoned leasehold improvements to the shareholder which would increase his basis in the property.

Msmith7305 (talk|edits) said:

27 December 2007

Waynecpa-

Thanks for the reply (you too, WesR)

Have read them. Seems to me those are concerning sale or exchange of property between related taxpayers. Property was not sold or exchanged between related taxpayers. I follow the thought of what you say but do not see how 267 or 707 fit.

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