In the event that you go from chicken coop to raw land and there’s a percentage that’s 1245 property, are you liable for the tax on the entire deal or just the tax on the depreciation on that 1245 property.
This might be a planning opportunity because before you sell your chicken coop to the buyer, you may want to say in the purchase agreement: “let’s agree on the allocation of price between the land that I’m selling you and this worn out chicken coop.” You as the seller probably want to minimize the value allocated to the chicken coop building improvement that you’ve written off and you want to maximize the value attributed to the dirt.
The buyer is going to have the opposite intention because as soon as they buy it they’re going to want to take bonus depreciation on that used improvement. So there’s a tension between buyer and purchaser, but generally the IRS will respect an arms length allocated negotiation of value. If you truly did write down that chicken coop, it’s remaining basis should bear some resemblance to its remaining worn out value.
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