Loan Fees on Business Loans???
The business bought an office building to conduct their business. The escrow statement includes Loan Fees .(SBA fee such as SBA guarantee fees, loan packaging fees, appraisal fees, environmental survey fee) Do they get added to the basis of the building or do they get expensed or amortized? To my understanding, escrow/title fees are added to the basis, real estate taxes and hoa fees are expensed. So what about these loan fees? This is what I read on the IRS website in real property section, which is confusing to me http://www.irs.gov/publications/p551/ar02.html#en_US_2010_publink1000256917
its saying "You cannot include in your basis the fees and costs for getting a loan on property.... If these costs relate to business property, items (1) through (3) are deductible as business expenses. Items (4) and (5)(which are loan fees) must be capitalized as costs of getting a loan and can be deducted over the period of the loan. "" So, the loan fee must be capitalized, correct? Now, my question is what do they mean by "capitalized"? How would I record it in QuickBooks? Do I take all loan fees and create an asset account for the amount? So loan fees become an asset on the balance sheet?! That seems too weird to me....Then create amortization expense account and accumulated amortization account. And every month I would debit amortization expense and credit accum amortization? or do I actually add the loan fees to the basis of the building and then depreciate every year?