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Tuesday, November 14, 2017   /   by Claude Boiron

Real Estate negotiations can go really well when you know the rules

Evidently, price is usually the number one most important factor for buyers when buying Real Estate. However, in Commercial Real Estate, how the purchase price is allocated between land and improvements (buildings) or other assets, can make a very real (dollar) difference to the buyer over time.

In the tax world, land cannot be depreciated – but just about everything else can be. For example, if you buy a property with a warehouse on it for $1,000,000, and the allocation of the $1,000,000 is: $600,000 to the land, and for $400,000 to the building, you’ll be able to depreciate 4% of the building every year (except for the first year, which is only 2%), on a declining balance. That means that the first year you’ll be able to deduct $8,000 from the property revenue (2% of $400,000), so you pay taxes on a lower amount of income. The second year, you’ll be able to deduct $15,680 from the property revenue (4% of the balance of the $400,000 – which is $392 ...

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