Treatment of land preparation costs in a low-income housing tax credit development

Article Abstract:

Depreciation of site preparation costs, capitalized in conjunction with development of low-income housing tax credit (LIHC) property, is an area receiving little guidance until the 1995 Eastmont Mall case. Traditionally, depreciability of improvements has been determined by association with other depreciable assets. Nonwasting assets, such as clearing and grading costs, are nondepreciable. However, grading costs passing the contemporaneous replacement of asset test are depreciable. In Eastmont Mall, the grading and leveling improvements were nondepreciable because they were permanent improvements not to be reincurred if the mall was ever rebuilt.

Cases

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Tax ideas

Article Abstract:

Real property owners should be aware of developments in the tax treatment of involuntary conversion proceeds, time share rental passive activity losses, and depreciation of building improvements and excavated land. Cost classification studies are useful in analyzing depreciation of improvements to certain types of buildings, such as warehouses and sports arenas. An excavation depreciation case, an IRS Private Letter Ruling on involuntary conversion, and an IRS Technical Advice Memorandum on time share condominiums are also discussed.

Taxation, Real property tax, Real property taxes, Timesharing (Real estate), Timeshares (Real estate), Involuntary conversion

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Tax credit recapture avoidance: the bond posting exception

Article Abstract:

A owner/seller-posted bond can be used to create an exception to the recapture rule governing the low-income housing credit (LIHC). The bond allows the owner/seller to take additional LIHC credits until the property transfer date, thereby minimizing the loss of credits caused by the recapture events. The applicability of the de minimis rule, returns claiming excess credits, and bond requirements concerning sureties, term, amount, and reporting are also discussed.

Direct Property and Casualty Insurance Carriers, Surety insurance, Administration of Housing Programs, Low Income Housing Prgrms, Usage, Public housing, Housing policy, Recapture (Taxation), Surety bonds

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