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Depreciation of commercial buildings

March 3, 2015 | 25,00 EUR | answered by StB Steffen Becker

Hello,

I have the following question: how do I proceed with depreciation if the cost of the land exceeds the cost of the building? Can the house be depreciated in this case?

Key points:
Purchase price of the house: 23,000 (acquired in an auction)
Value of the land according to current land value: 23,280 (970m² at 24 €)
Unit value: 14,000
Market value: not known
Seller's estimated selling price (before the auction): 130,000
Property: Hotel with 500 m² area including inventory

If I subtract the land price from the house price, there is nothing left to depreciate... Could I simply apply the flat rate of 80/20?

I look forward to your response.

Regards,

StB Steffen Becker

Dear questioner,

Thank you for your inquiry. I will answer this within the scope of an initial consultation based on the information provided. Missing or incorrect information can influence the legal outcome.

In this case, you can determine the division of the purchase price into land and building using a simplified process, by applying the ratio of land value €23,280 to the "actual" total value of €130,000 to the purchase price of €23,000; thus, 17.9% of the purchase price would be allocated to the land (see also BMF dated 23.09.2014: http://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Steuerarten/Einkommenssteuer/2014-09-23-Berechnung-Aufteilung-Grundstueckskaufpreis.html).

I hope this helps.

Kind regards,
Steffen Becker
Tax consultant