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Edsel

Abandon Leasehold Improvements

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A customer is depreciating some $25,000 in Leasehold Improvements.  Customer paid for them, but they are such an integral part of the building that he cannot own the property.

Deterioration of the neighborhood has been occurring.  The last straw came when the landowner rented to a Tatoo Parlor in the unit next to them.  Taxpayer will be moving in October.

Question:  How is the loss on the leasehold improvements reported?

  1. Fully depreciate the remaining value in the leasehold improvements account.  Loss is disguised as depreciation expense.
  2. Write off the remaining book value with a 4797 transaction, showing zero for the selling amount, and reporting original value and accumulated depreciation on other lines.
  3. ???  (your guess is probably better than mine)

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