Depreciation & goodwill

Greetings, I’ve seen a couple good postings here with respect to the 75%/25% improvements/land ratio used when depreciating a park on tax returns.Has anyone assigned assigned any of the purchase price of a park to goodwill, and if so, what can you tell us about it?Thanks as always,HPD

We certainly have.  You need to find out what the fair market value (FMV) is of comparable raw land around your MHP.  Whatever that price per acre is, that’s the amount you should assign to your land.  This is the non-depreciable amount, and it’ll probably be around 25% of what you paid (excluding the value of any POHs you are purchasing).  The remaining 75% will be assigned either to improvements (fencing, signage, clubhouse, roads, water pipes, sewer pipes, etc.) or to goodwill.  The various improvements all have separate depreciation schedules, which average around 15 years (but ask your accountant for details to get your schedules correct).  Goodwill is 15 years.  So it does not really make much difference whether the non-depreciable amount gets allocated to one or the other.  We typically allocate most of the 75% to various improvements, and end up with 10% - 15% Goodwill.Your mileage may vary,-jl-

Jefferson, you are awesome as always.  A quick corollary - does any of this factor into property tax assessments?  i.e. I bought a park at a higher price than the guy who did the turnaround, I’m guessing the county is going to want to tax me on the purchase price, but in truth, only some of the higher price is because the site was improved, the other part is the previous owner sold me a stable tenant base that generally pays it’s bills.  Does one have any argument with the county along these lines?Thanks as always,HPD