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Level 2

How do you record leasehold improvements for a brand new lease space? Is that considered CIP and reclassified as an asset? Or do I expense it?

The space is brand new and just a shell, and we have to construct inner walls and stuff. We have been making downpayments to the contractor, but I don't know whether to capitalize or expense it. Also, do we need to issue a 1099 to the contractor??
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Best answer 01-02-2020

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Level 15

How do you record leasehold improvements for a brand new lease space? Is that considered CIP and reclassified as an asset? Or do I expense it?

yes, payments by check or cash to the contractor do get reported on the 1099, if he is not taxed as a corporation.  You should have a form w-9 signed by the contractor.

 

Lease hold improvements are an asset, all costs to complete the improvement are part of the cost of the asset.  After the improvements are finished and the property is placed in service then that total is moved from the construction asset account to a fixed asset account and then is subject to annual depreciation per IRS pub 946

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Moderator

How do you record leasehold improvements for a brand new lease space? Is that considered CIP and reclassified as an asset? Or do I expense it?

Thanks for getting back to us, sc-myralai.

 

Yes, that is correct it is part of the costs to complete the improvement.

 

You can check these articles about depreciating and recording assets in QBO:

Please let me know if there's anything else you need. I'll always be around to help you out.

View solution in original post

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Highlighted
Level 15

How do you record leasehold improvements for a brand new lease space? Is that considered CIP and reclassified as an asset? Or do I expense it?

yes, payments by check or cash to the contractor do get reported on the 1099, if he is not taxed as a corporation.  You should have a form w-9 signed by the contractor.

 

Lease hold improvements are an asset, all costs to complete the improvement are part of the cost of the asset.  After the improvements are finished and the property is placed in service then that total is moved from the construction asset account to a fixed asset account and then is subject to annual depreciation per IRS pub 946

View solution in original post

Highlighted
Level 2

How do you record leasehold improvements for a brand new lease space? Is that considered CIP and reclassified as an asset? Or do I expense it?

Contractor costs are included as costs to complete the improvement, correct? I believe what we are paying him is to cover all material, labor, fees, etc. Just want to make sure I correctly include all costs.

 

And thanks for the heads up about the 1099/w9!

Highlighted
Moderator

How do you record leasehold improvements for a brand new lease space? Is that considered CIP and reclassified as an asset? Or do I expense it?

Thanks for getting back to us, sc-myralai.

 

Yes, that is correct it is part of the costs to complete the improvement.

 

You can check these articles about depreciating and recording assets in QBO:

Please let me know if there's anything else you need. I'll always be around to help you out.

View solution in original post

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