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Burns & Hansen, PA

Gains and losses can apply to the sale of commercial real estate

Business people all throughout Minneapolis know that wins and losses are all part of being in the corporate world. Sometimes investments and business strategies pay off well and in other cases a decision may lead to lost revenues for an organization. One area of business planning that can increase or decrease the wealth of an organization is how it utilizes its commercial real estate. Commercial real estate can be considered an asset of a business or organization and when it is disposed of those losses or gains can be relevant to the organization's tax obligations.

As the national tax filing deadline is just around the corner, this post will take a closer look at how the disposition of commercial property can affect a corporate or private party's tax return. First, a disposition of commercial property can mean a number of things. It can involve a property's sale or trade. It can involve the property's abandonment, condemnation or foreclosure. A disposition can involve other events happening to the property, and those with more questions can seek out clarity on the law as applicable to their cases.

Next, a party may look at whether through that disposition of property a loss or a gain was realized. This evaluation can be computed by comparing the value of the property at its disposition to the adjusted basis that the party had in the property. If the value at disposition exceeds the adjusted basis, then a gain is realized. If the value is less than the adjusted basis, a loss is recognized.

Gains and losses then must be identified as ordinary or capital. This identification will factor into how the tax code treats the increase or deficit to the party's business. Gains are generally taxed and losses are generally written off.

The disposition of commercial real estate can affect how a party files its taxes. Professionals in the areas of real estate and tax law can provide further information on the importance of property recognizing these transactions on a party's tax returns. While the information contained in this post is informative, please do not rely on it as specific legal guidance or advice.

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8401 Wayzata Blvd Suite 300
Minneapolis, MN 55426

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