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6 Nov 2018

7. Why is it important for a landlord to provide in a real property lease agreement that the property shall be returned to the landlord in “good condition, ordinary wear and tear and obsolescence excepted,” rather than in “original condition?”

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Jarrod Robel
Jarrod RobelLv2
7 Nov 2018

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Indicate whether the following statements are "True" or "False" regarding cost recovery for tax purposes.

a. Realty (real property) generally includes land and buildings permanently affixed to land

b. Personal use property is only personalty property (personal property) that is held for personal use rather than for use in a trade or business or an income-producing activity

c. Assets used in a trade or business or for the production of income are eligible for cost recovery if they are subject to wear and tear, decay or decline from natural causes, or obsolescence

d. The key date for the commencement of depreciation is the date an asset is purchased

e. The basis of cost recovery property is reduced by the cost recovery method allowed, and not less than the allowable amount

f. If the mid-quarter convention applies in the computation of cost recovery in the year of sale of an asset, the property is treated as though it were disposed of at the midpoint of the quarter

g. If the mid-quarter convention applies in the computation of cost recovery in the year of sale of an asset, no cost recovery deduction is allowed in the year of sale

h. If the mid-quarter convention applies in the computation of cost recovery in the year of sale of an asset, one-quarter of the annual cost recovery deduction is allowed in the year of sale

Tracy Allen rented a home in which she had been residing since the summer of 1998 l. the landlord of the house later fail to pay taxes on the property and on March 16, 2000 hard assets LLC acquired the property from the owner in LIEU of the foreclosure. When hard assets obtained title it did not intend to lease the property Hard assets advise her and her family that they were not supposed to be there and that they had 30 days to vacate the premises. After 30 days Alan has not vacated the property. While residing at the property the children living with Alan suffered elevated blood levels and were originally injured from the lead paint exposure as a result the children’s mother filed a suit against one of the members of the LLC for violations of the cities housing code and neglingence . Should be a member of the LLC be held personally liable for the alleged injuries of each child who live at Allen’s home why or why not
Gold, Inc., is an accrual basis taxpayer. In 2011, an employee accidentally spilled hazardous chemicals on leased property. The chemicals destroyed trees on neighboring property, resulting in $30,000 of damages. In 2011, the owner of the property sued Gold, Inc., for the $30,000. Gold's attorney feels that it is liable and the only issue is whether the neighbor will also seek punitive damages that could be as much as three times the actual damages. In addition, as a result of the spill, Gold was in violation of its lease and was therefore required to pay the landlord $15,000. However, the amount due for the lease violation is not payable until the termination of the lease in 2014. None of these costs were covered by insurance. Jeff Stuart, the president of Gold, Inc., is generally familiar with the accrual basis tax accounting rules and is concerned about when the company will be allowed to deduct the amounts the company is required to pay as a result of this environmental disaster. Write Mr. Stuart a letter explaining these issues. Gold's address is 200 Elm Avenue, San Jose, CA 95192.

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