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Trade Secrets Purchase Price Allocations Save Tax Dollars as published in Apartment Finance Today, March 2007 |
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Purchasing an apartment building is not simply buying real estate. Most often large amounts of personal property, such as kitchen and laun dry room appliances, change hands in the transaction. Additionally. Intangible personal property exists in the form of the leases in place. Clearly, buyers are willing to pay more for a fully leased properly than for one requiring lease-up. For property tax purposes, the difference between the value of a fully lased property and one only partially leased represents an intangible lease hold . This difference may be appropriate to reclassify as an intan gible right. To properly record a Purchase, buyers must allocate value to the personal and the intangible property involved in the transaction. With proper allocation, transfer taxes may be reduced, the buyer’s depreciation schedule may reflect a faster depreciation for shorter-lived as sets, and the assessor will have the correct allocated sales price. Proper recordation minimizes prop erty taxes.
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J. Kieran Jennings, partner at Siegel Siegel Johnson & Jennings, a law firm with offices in Cleveland and Pittsburg. The firm is the Ohio and Western Pennsylvania member of the American Property Tax Counsel, the national affiliation of property tax attorneys. He can be reached at kjennings@siegeltax.com |
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