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irs rules for depreciation-own vs rent polebarn

chrisscholz Join Date: Oct 2003 Posts: 104 iowa

2007-03-11          140380

I got a bid for a Wick polebarn 30'x50' with a 12' lean on one side, and 3"ceiling insulation for $32000. They are offering a 7% winter discount. I will use 40% of the building for ag/farm storage, 40% for business storage, and 20% for hobby/personal. The salesman said I can lease if for 5 years (thru Wells Fargo etc.) with an option to buy for a certain amount at the end($4000-$6000)and fully expense the lease payments. If I buy it conventionally, I would have to depreciate it at the normal 39 years. The lease would cost about 6-7%, but I am in the higher tax brackets, making it look attractive. However, one accountant's opinion is that if the lease is set up with a purchase agreement at the end, you cannot write-off the lease. A previously posted message said the lease only really works for metal framed barns, because they could be theoretically moved and resold. Should I lease, or buy outright?

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irs rules for depreciation-own vs rent polebarn

earthwrks Join Date: Dec 2003 Posts: 3853 Home Office in Flat Rock, Michigan   Pics

2007-03-12          140404

I'm not sure it was me that said that about the metal buildings or not, but that is what I was told about leasing. The buyout plan was a dollar at the end of a five year lease at 10%. I was told that a wood pole barn can't qualify for a lease but can be depreciated over 28 years.
I'd gpo for metal anyway as it is quick and easy to erect and don't have to worry about termites or rotting poles (my neighbor built his 30 years ago and has recently replaced about 10 poles). ....

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irs rules for depreciation-own vs rent polebarn

kwschumm Join Date: Feb 2003 Posts: 5764 NW Oregon   Pics

2007-03-12          140411

I don't know the answer but appreciate you bringing the question up. In the next year or so we want to build a big shop and didn't even think of the tax advantages that may be available. ....

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irs rules for depreciation-own vs rent polebarn

chrisscholz Join Date: Oct 2003 Posts: 104 iowa

2007-03-12          140414

I like some aspects of the metal building, but with the higher price it may not be as attractive. I have seen the metal screws condensate, even when insulated, and rusting in the ceiling, etc. I am sure with today's better insulation this is not a big issue.
I need to investigate the lease issue more. ....

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irs rules for depreciation-own vs rent polebarn

kthompson Join Date: Oct 2005 Posts: 5275 South Carolina   Pics

2007-03-13          140416

There is also one other factor you may need to consider and that is insurance on the building. The wooden frame building was more expensive here for property insurance than a metal frame. Have no idea if it would affect the tax basis for the building. If based upon square footage only might not but if based upon construction cost probably would. kt ....

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