q-tip trust

[gearhead]

My mother is the income benificary of a q-tip trust. The trust holds a commercial property which pays the rent to my mother as part of the trust income. The trust accounting shows a sizable deduction from the rent paid to my Mom for depreciation. I thought that depreciation was a non-cash charge. The building had been depreciated to zero prior to my Step-Fathers death. The property appraisal value was based upon the land value only. The highest and best use was as vacant property. How can there be a deduction to my Mom's income for depreciation of the building?

Thank you.

 

[ALawyer]

Depreciation IS an non-cash charge.

If this was for TAX purposes, I could understand it, but I'd ask an accountant in your area for advice.

 

[gearhead]

Thanks ALawyer,

I consulted with an accountant. I found that it is possible for the trust to deduct depreciation from a rental property. The purpose would be to provide for maintenance and repair. The trust must specifically allow such a charge however. My Mom's trust does not.

Also, the property value is reset to the fair market value at the time of death. Here, the value of the property is in the land. The apprasial set the value according to the highest and best use as useable for higher developement. The building was considered to be an obstruction to the value as it would have to be demolished to realize the highest value.

The trustees have made an error in deducting depreciation since land cannot be depreciated. I'm afraid this may have to go to court.

Again, thank you for your response. I hope this may be of help to anyone in a similar situtation.

Ron Sturdy