If a landlord provides a tenant with a build-out allowance used for improvements owned by the tenant, the landlord generally treats the allowance as a lease acquisition cost
, amortizing it over the lease tenn.
According to the joint venture contract, the company is to pay 45 percent of the lease acquisition cost
for a 50 percent interest.
If the lessor has made the economic outlay necessary to construct the tenant improvements, but it is dear under the lease agreement that the lessee/tenant is the owner of the improvements, the lessor should be able to treat the cost of the improvements a a lease acquisition cost
and recover the investment through amortization deductions over the lease term.
This result is reasonable, because the cancellation fee resembles a lease acquisition cost
that, under Sec.
Conversely, the landlord has a deferred lease acquisition cost
asset amortizable over the term of the lease, including renewal periods, which is usually substantially less than the 31.5 years for depreciation.
Typically, the landlord will capitalize the cash payments as a lease acquisition cost
and amortize them over the lease term.
When a lessee acquires a lease along with other intangibles, the House Report limits the portion of the purchase price allocable to the amortizable lease acquisition cost
to prevent the shifting of costs from Sec.
Under the theory of the Grinalds footnote, the unrecovered cost of the old improvements and the amount of the payment would be treated as a lease acquisition cost
and written off over the term of the new lease.
Additionally, lease acquisition costs
remain low alongside high but steady yields.
"Dubai offers attractive rents and strikingly lower overall lease acquisition costs
for both financial corporations as well as creative/SME firms when compared to other global cities."
178, lease acquisition costs
are amortized over the term of the lease; in certain circumstances, this includes extensions.