Depreciation Question
how does the following work? What I am trying to understand is if:
An investor own five Kroger stores (any credit rated tenant) and is selling them.
Prior to selling, he invests $2M / store to install fuel cell based renewable energy system
This increase the value of the property by creating an additional cash flow for the buyer, that being buying the green, rather than grid juice.
Due to the Cap-rate multiple, I think he would get more value that it cost
How is the seller’s tax affected? Is the $2M just an increase in basis? If, how, does depreciation come in to play if installed the same year of sale?
I think this is a question for your accountant. I know when you purchasde a vehicle you can deduct the purchase the year you buy. But I do believe it is spread out by a few years with depreciation. If you sell it the next year. Not sure how that works but I would rely on an accountant. Best of luck and let me know what you find out.
[addsig]