When Does Title Pass to Government on Depreciated Property?
- Depreciation is a tax deduction which decreases the taxable income of an individual or business entity in a given year. The purpose of depreciation is to reflect the expense someone incurs by wearing down a business asset through its use. This expense is calculated using the acquisition price of the asset over its "useful life," or how long the IRS expects such an asset to last with continued business use. Basis is the means of keeping track of the value a person or company has in their property for tax purposes. This figure is calculated by decreasing the original price paid for the asset minus any depreciation taken over the past years. If depreciation decreases an asset's basis to zero, the owner retains possession.
- The ability of a government entity to take property from private citizens is limited by the Fifth Amendment, which requires that the government to demonstrate that the seizure is for a public purpose and also provide fair compensation. The public purpose does not need to be defined based on the number of people who would benefit from the property that is taken, and can even be taken with the express purpose to only benefit a segment of the community. Fair compensation is based on the market value of the property at the time it is taken. Federal, state, and local governmental agencies are bound by this rule. While the legislatures of both federal and state governments define the process of governmental "taking," the courts retain the right to review any acquisition of property. So long as the taking is not unreasonable or arbitrary, it will be upheld.
- Condemnation is the process by which a government exercises its powers under eminent domain. While the process varies based on the agency doing the taking, there is a general process that is consistently applied in these situations. First, the government will attempt to purchase the property before beginning the condemnation process. If the owner refuses to sell, the government will go to the court which has jurisdiction, or the right to hear a case about this type of issue. The government must demonstrate at this hearing that it attempted to purchase the property in good faith but could not reach an agreement. It must also demonstrate that the property is being acquired for a valid, legal public use. At this time the property owner can respond. If the government establishes that the taking is justified, it will then pay the property owner the fair market value for the property.
- If a government entity seeks to take some of your property through condemnation, consult with a licensed attorney to protect your interests. Every effort has been made to ensure this article's accuracy, but it is not intended to be legal advice.
