Generally, a write-down to fair value in the case of a building is only allowed if the decrease in value will last for at least half of the remaining useful life of the building. For normal (linear) depreciation purposes, the typical useful life of a building is defined by law as being 50 years (in the case of residential property) and 33.33 years (in the case of commercial property). In the case concerned, the Federal Tax Court (BFH) had to decide whether the remaining useful life for purposes of fair value depreciation should be based on the useful life in the context of the individual business or on the typical useful life. The taxpayer in the case intended to sell the property concerned within the next two years. Unfortunately, the Court decided in favor of the typical useful life. According to the decision, even the risk of a loss resulting from the sale of property in the near future does not justify writing down the value of the property to its expected sales price if the fair value falls below the book value by not more than half for the rest of the typical useful life. The decision makes it much more difficult to justify fair value depreciation.
