Home Page link  

new roof on rental property

  
Groups | Search | About
User Password
Register Now! Lost Password?

Taxes General Forum - Tax professionals meeting place and answers to queries. (Moderated)

 Post an article  get this group's latest topics as an RSS feed add this group's latest topics to your My MSN content add this group's latest topics to your My Yahoo content  add this group's latest topics to your Google content  YahooMyWeb Yahoo!  Google Google  Windows Live Favorites Windows Live  del.icio.us del.icio.us  digg digg  Add to Netscape Netscape
Subject Author Date
new roof on rental property way222 02-17-2007
Posted by way222 on February 17, 2007, 5:17 am
Please log in for more thread options
 After looking over some old posts here, I've learned that
replacing a roof on a rental property has been generally
established as a repair, not a capital item:

From Oberman (47 TC 471): "We think that the expenditure in
question should properly be considered as a deductible
ordinary and necessary business expense rather than a
capital expenditure."

http://groups.google.com/group/misc.taxes.moderated/browse_frm/thread/a1a2831912d11d9b/2760be9ab5da6f54?rnum=1#2760be9ab5da6f54

In 2004 I put a new roof on one of my rentals (removing old
shingles, put on new shingles) in order to fix several leaks
and other issues. On my tax return for that year, I
capitalized the expense using SL 27.5 year period.

Can I go back and amend my return for 2004 and 2005 and
convert it to a repair? Or am I stuck depreciating it, since
that is what I elected to do back then?

Thanks.

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Mark Bole on February 18, 2007, 3:50 am
Please log in for more thread options
 way222@gmail.com wrote:

> In 2004 I put a new roof on one of my rentals (removing old
> shingles, put on new shingles) in order to fix several leaks
> and other issues. On my tax return for that year, I
> capitalized the expense using SL 27.5 year period.
>
> Can I go back and amend my return for 2004 and 2005 and
> convert it to a repair? Or am I stuck depreciating it, since
> that is what I elected to do back then?

After two years of "incorrect" depreciation, you are better
off just continuing it rather than trying to correct it.

Whether it's roofs or water heaters, one is simply removing
a worn-out component from basis and replacing it with a new
component of the same kind. For example, in a personal
residence, each roof simply replaces the old (removed) one
in the basis, and each water heater likewise. For personal
use it's not deductible, for rental use it's an expense.

This is distinct from an improvement, where the useful life
is*extended*, so for example the excess cost of added
"Super-Duper-Water-Heater" over removed
"plain-old-water-heater" would be added to basis or
depreciated, respectively.

This conclusion is based on something I read in Pub 523:
"You put wall-to-wall carpeting in your home 15 years ago.
Later, you replaced that carpeting with new wall-to-wall
carpeting. The cost of the old carpeting you replaced is no
longer part of your home's adjusted basis."

-Mark Bole

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by scott s. on February 19, 2007, 2:01 pm
Please log in for more thread options
> way222@gmail.com wrote:

>> In 2004 I put a new roof on one of my rentals (removing old
>> shingles, put on new shingles) in order to fix several leaks
>> and other issues. On my tax return for that year, I
>> capitalized the expense using SL 27.5 year period.
>>
>> Can I go back and amend my return for 2004 and 2005 and
>> convert it to a repair? Or am I stuck depreciating it, since
>> that is what I elected to do back then?

> After two years of "incorrect" depreciation, you are better
> off just continuing it rather than trying to correct it.
>
> Whether it's roofs or water heaters, one is simply removing
> a worn-out component from basis and replacing it with a new
> component of the same kind. For example, in a personal
> residence, each roof simply replaces the old (removed) one
> in the basis, and each water heater likewise. For personal
> use it's not deductible, for rental use it's an expense.

While on this subject, I have had a rental property for many
years. Over that time, I have capitalized the replacement
of many items, all of which were included within the general
"house" which is completely depreciated (though most of the
replacements are still depreciating). The scrapped items
all had nill value, in fact I probably paid to haul them
away. But should I have done some 4797 to reflect the
scrapped items which were replaced? For example, roof,
fence and furnace?

scott s.

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Mark Bole on February 19, 2007, 8:26 pm
Please log in for more thread options
scott s. wrote:

> While on this subject, I have had a rental property for many
> years. Over that time, I have capitalized the replacement
> of many items, all of which were included within the general
> "house" which is completely depreciated (though most of the
> replacements are still depreciating). The scrapped items
> all had nill value, in fact I probably paid to haul them
> away. But should I have done some 4797 to reflect the
> scrapped items which were replaced? For example, roof,
> fence and furnace?


I don't think so, if the items were always part of the
single depreciable "house". Disposition of other separately
depreciated items, yes.

In the first year of a rental, even if the property was
bought in a single transaction, I would normally separate
out personal property such as appliances, and perhaps
15-year property such as fences and such, if it seemed
appropriate, on the depreciation worksheet. (In some parts
of the country it is more common to remove all appliances
upon sale, but not here). The taxpayer of course has to
have a reasonable approach to determining the value of such
property. Then when such appliances are replaced (because
they are broken and worthless), or the entire property is
sold they are reported separately on form 4797. Upon sale
of the entire property, it is not unusual for the FMV of the
appliances to end up being exactly what their remaining
basis is, for a gain of zero. Listing them separately on the
sales contract couldn't hurt. Feedback on this approach
welcome...

-Mark Bole

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Harlan Lunsford on February 19, 2007, 8:26 pm
Please log in for more thread options
scott s. wrote:
>> way222@gmail.com wrote:

>>> In 2004 I put a new roof on one of my rentals (removing old
>>> shingles, put on new shingles) in order to fix several leaks
>>> and other issues. On my tax return for that year, I
>>> capitalized the expense using SL 27.5 year period.
>>>
>>> Can I go back and amend my return for 2004 and 2005 and
>>> convert it to a repair? Or am I stuck depreciating it, since
>>> that is what I elected to do back then?

>> After two years of "incorrect" depreciation, you are better
>> off just continuing it rather than trying to correct it.
>>
>> Whether it's roofs or water heaters, one is simply removing
>> a worn-out component from basis and replacing it with a new
>> component of the same kind. For example, in a personal
>> residence, each roof simply replaces the old (removed) one
>> in the basis, and each water heater likewise. For personal
>> use it's not deductible, for rental use it's an expense.

> While on this subject, I have had a rental property for many
> years. Over that time, I have capitalized the replacement
> of many items, all of which were included within the general
> "house" which is completely depreciated (though most of the
> replacements are still depreciating). The scrapped items
> all had nill value, in fact I probably paid to haul them
> away. But should I have done some 4797 to reflect the
> scrapped items which were replaced? For example, roof,
> fence and furnace?

That is the procedure. Say you were depreciating a roof
from 1991 for 27.5 years, and you had to replace it (again!)
in 2006. You'e taken 15 years of depreciation yet have
12.5 to go, but there is no roof! You write the remaining
basis off on the form 4797.

ChEAr$,
Harlan Lunsford, EA n LA

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Similar ThreadsPosted
Re: new roof on rental property February 22, 2007, 2:08 am
Question about land and property basis for a rental property January 18, 2007, 4:01 am
Rental Property May 25, 2007, 1:41 pm
New law on rental property October 4, 2008, 3:37 pm
Sale of Rental Property February 4, 2007, 2:24 am
Rental property partnership buy out February 18, 2007, 9:51 pm
Sale of Rental Property - Help... March 19, 2007, 11:12 am
When is a rental property 'acquired' ? March 30, 2008, 6:16 pm
Commission on ale of rental property April 11, 2008, 11:21 am
Property tax deduction? (non-rental) April 13, 2008, 10:48 am

Contact Us | Privacy Policy
This site is not affiliated with Intuit - makers of Quickbooks and Quicken software
This site is not affiliated with Sage Software - makers of Peachtree accounting software
XML SitemapXML Sitemap