Commercial property owners willing to wade through piles of IRS regulations may be able to take advantage of faster write-off methods, resulting in larger deductions.

According to RIA, a provider of information and technology to tax professionals, owners of commercial realty may be able to depreciate their buildings and structural components over a short recovery period using little-known depreciation rules.

RIA says that owners of commercial realty generally don’t have the luxury of accelerating their depreciation schedules. Instead, they are locked into a system where their assets depreciate slowly over a predetermined period of 39 years.

But an “escape hatch” detailed in RIA’s new tax guide shows how some assets installed in a building may be considered personal-property-type assets, rather than structural components. Additionally, RIA experts say that some types of pre-fab buildings may be considered personal property for tax purposes.

When an owner finds personal-property-type assets in his buildings, he will be able to write off those assets over a period of only five to seven years, and some assets may be eligible for expensing. The result: faster write-offs and larger deductions. How can a building owner determine if his property is tangible personal property rather than commercial realty?

“Detailed IRS guidance on the subject doesn’t exist,” said Bob Trinz, an editor with RIA. “Through a quirk in the rules, the answers often lie in cases decided and rulings issued decades ago - a body of law most people thought was dead and buried for good.”

More information is in RIA’s new guide, “Finding Fast Write-offs in Commercial Realty.” Check out their Web site at http://ria.thomson.com.

In other news, Liberty Property Trust (NYSE: LRY) turned in stellar earnings figures for the second quarter. Funds from operations (FFO) for the quarter increased to $58.5 million, from $51.6 million in second-quarter 1999. On a per share basis, FFO increased by 11.3 perecnt.

This is Liberty's fifteenth consecutive quarter of double-digit percentage growth in FFO per share.

Earnings were down, however, with diluted net income of 55 cents per share, compared to 60 cents last year. But the company’s earnings still are on track, with income of $1.06 per share for the first six months of 2000, compared to $1.05 for the first half of 1999.

In the second quarter, Liberty brought into service seven development properties, which are currently yielding 9 percent on a $53 million investment. In the future, these properties are expected to yield approximately 13.7 percent.

On the news, the company’s shares traded at their year-long high of $27 ¾. Despite a stock price that has risen steadily from the $21 range a year ago, Liberty’s shares still are trading at a low, low 13.5 price-to-earnings ratio. With three “strong buy,” seven “moderate buy” and three “hold” recommendations, Liberty might be a good bet as investors run to the hedge of real estate investment trusts (REITs).

One of the nation’s largest REITs, Liberty currently owns and manages 47 million square feet of space in more than 600 properties.

Published: July 26, 2000

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Lesley Hensell covers commercial real estate and financial issues for Realty Times. Based outside of Dallas, Lesley works with high-tech and real estate clients as an independent marketing and public relations consultant. She also writes for several publications, including the Dallas Morning News. E-mail Lesley at: lhensell@earthlink.net