Business reimbursed by landlord for portion of prior year LH improvements

[David]

Business owner was reimbursed for a portion of the leasehold improvements that were done in 2012.

I'm wondering how to handle this. Set it up as a liability and amortize it into income over the remaining depreciation period of the leasehold improvements?

Or can I add it as a negative fixed asset? I have had so many problems with ATX fixed assets that I am afraid to do anything out of the ordinary.

Thanks.

[kcjenkins]

I'd just adjust the remaining basis in the asset, which will have the same effect [reducing amortization each yr] without any odd item inviting an audit.

[David]

Thanks, KC. I don't know why I didn't think of that.

I don't see a place in fixed assets to adjust the remaining basis. Where do I do that?

Thanks.

[jshtax]

You just change the original amount.

[David]

That won't raise a red flag with the IRS or cause a problem with prior year accumulated depreciation?

Thanks.

[kcjenkins]

Nope. If it was a massive amount, you might get a CP2000 and have to explain, but that's the most that would happen. And the prior depreciation was correct at the time, so no issue there.

[David]

OK. Thanks.