I was under the impression the standard depreciation in the industry for a MHP is 75% of the purchase price over 15 years SL depreciation?
Is this not the case and what is the source that proves these improvements are 75% of purchase price for 15 years? My CPA is asking on a park I purchased in 2018. I told him I learned from Boot Camp that this is the standard, but what is the source?
I am not sure exactly what percentage we depreciate, but I know it is not nearly as simple as applying a standard industry metric. Every park is different and every park has different assets. Different assets are depreciated over different times. You will have to allocate the purchase price to each of the asset classes and depreciate each allocated amount differently. Also, consider the goodwill component. That is amortized over 15 years.
You need a cost segregation study.
Read the ATG (Audit Technique Guides for IRS) and this will give you guidelines.
15 year property for MHPs will be 40-60% for 15 year property, with higher percentage if there are no POH. For 2018, you are running out of time to file, fyi, and this is an item you cannot reallocate later.
For what it is worth, my CPA told me that a Cost Segregation Study was not required to substantiate my depreciation approach but that I could use the appraisal done at the time of purchase to allocate infrastructure depreciation. If it came to an audit, it would be preferable to have the Cost Segregation, but it would not be required. Good luck.
You should take a look at Sun’s (SUI) public filings. They are much more aggressive than I had been previously, especially in some of their more rural areas (where they often allocate land between almost 0 and 10%).
Your CPA should read the ATG, as it sets forth the suggested methods and practices to win an audit (and I expect MHP audits to be on the rise due to all the REIT ane PE firms now in the business). Better yet, you should read it and then you will likely get a new CPA.
Thanks for the followup, but I am going blank on “ATG”. What is that and how do I get me hands on it?