What is a Partial Asset Disposition?

A Partial Asset Disposition (PAD) allows a building owner to write down the items removed during a renovation or remodel, as well as the costs for the removal and disposal of those items.

• The ability to write off assets that are no longer in use
• Renovations/Remodels/Replacements
• Abandoned in place
• Common items - Roofs, HVAC, Electrical
• Retirement of a structural component of, or improvement to a building
• LED retrofit projects - energy savings and tax savings
• Partial Asset Dispositions must be taken in the same year as the renovation
• Removal costs are not required to be capitalized if a PAD is employed

How Does a PAD Work?

Commercial property owners can receive a tax deduction in the current year, but it is a "use it or lose it" opportunity. Failure to write down the remaining basis in the tax year the renovation was performed will permanently negate the opportunity.

A partial asset disposition will also yield permanent tax savings at the time of sale by reducing the building basis. The implementation of an engineering-based cost study will provide you with accurate calculations to apply the disposition to your tax return. Taxpayers are highly encouraged to make an annual election to take these additional write-offs as they improve tangible property.

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