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Posted by Harlan Lunsford on February 19, 2007, 8:26 pm
Please log in for more thread options Gil Faver wrote:
>> <snip>
>>> 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."
>> Let's look at what the publication 551 actually says...
>> Table 1. Examples of Increases and Decreases (table edited,
>> only partial and does not include any decreases,
>> BeanTownSteve) to Basis Increases to Basis
>>
>> Capital improvements:
>> Putting an addition on your home
>> Replacing an entire roof <______
>> Paving your driveway
>> Installing central air conditioning
>> Rewiring your home
>>
>> Roof replacement is a capital expenditure, lifetime of over
>> one year and materially extends the life of the property.
>> This is different than roof repair. If you elect to replace
>> a roof rather than repair it, the replacement is STILL an
>> improvement.
>>
>> Your carpet example is a bit off, it actually says the cost
>> of the REMOVED carpet is no longer part of the cost
>> basis,sorta logical. Argument can be made that carpet is a
>> decorating item in any event, carpet does NOT extend the
>> life of the asset, although it too is listed in the pub as
>> an improvement.
>>
>> A review of Pub 523 and 551 is in order.
> keep in mind IRS publications are the IRS interpretation
> of the law. A review of the actual law, and court
> interpretations of the law, is in order. replacing a roof
> is a repair, and does not extend the useful life of the
> building. Buildings generally last through several new
> roofs, at least.
That particular case which allowed a roof as repair; wasn't
it based on the fact that the whole roof was suddenly and
maybe catostrop..c..ly (sp?) destroyed? And thus the new
roof was immediately essential?
Now, what WAS the name of that case?
ChEAr$,
Harlan Lunsford, EA n LA
Moderator:
My recollection is that the Tax Court decided the property
was not rentable because the roof was leaking. I can't
recall the name either, but we all know my memory ain't
what it use to be.
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