I'm in the market for commercial property. I have a growing company, want a space customized for us, and we plan to stay long term. But buying is making almost no sense as you can't write down the costs against profit, whereas you can with rent.. so the only people buying such property are investors or people with money to burn in my experience. If they changed the tax code to let businesses get a deduction based on property they buy or build, ownership would be so much more diverse.
True. That's why it's common to set up two companies, one to own the real estate and one to operate the business. The business rents from the real estate company. This is OK with the IRS as long as the rent is commercially reasonable. Now, the operating company gets to treat the building cost as rent and deduct it. The real estate company gets to deduct mortgage interest and pays taxes only on its profits, the difference between rent and mortgage payments.
If the operating company goes bankrupt, it doesn't take down the real estate company with it. The real estate holding company just has to find a new tenant.
Why do you need this two-company set up in order to deduct mortgage interest from taxable income? Why wouldn't it work if the operating company bought real estate?
Yes, but the land and any rights appreciates. Only the building and some other improvements may be depreciated. In many markets a large percentage of the property is in first category.
Also you generally only realize any gain / loss when you sell property.
FWIW, I don't think there is anything special about R&D. Most of that is just straight up expenses, like salaries for the folks doing the R&D. Buying expensive equipment can be depreciated, regardless of the specific purpose.
