|
Posted by way111 on April 11, 2008, 12:21 am
Please log in for more thread options
Repair or improvement? I'm going back and forth in my own mind about
these:
1) Electrical panels had water leaking in to the boxes due to rotted
cover on the supply cable. Boxes had to be replaced because of rust
and the fire hazard caused by the water, along with all the breakers.
Repair or improvement?
2) Water heaters reached their end of life (about 10 years old). I
replaced them, rather than waiting for them to rust out and flood the
finished basement. Repair or improvement?
3) Water heater rusts out, tenant has no hot water. Heater must be
replaced. Repair or improvement?
4) I bought a building that needed substantial repairs (bank-owned,
trashed by tenants, etc). I understand that all repairs prior to
renting are improvements which have to be depreciated. Are all costs
depreciated over 27.5 yr SL? Or can I break out new appliances, doors,
flooring, etc. and depreciate at a faster rate such as 7 yr DDB?
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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
|
Posted by Avrum Lapin on April 11, 2008, 10:17 am
Please log in for more thread options
In article
way111@gmail.com wrote:
> Repair or improvement? I'm going back and forth in my own mind about
> these:
>
> 1) Electrical panels had water leaking in to the boxes due to rotted
> cover on the supply cable. Boxes had to be replaced because of rust
> and the fire hazard caused by the water, along with all the breakers.
> Repair or improvement?
This one is a push. If the new panel etc is better (meets newer code,
better access to breakers, etc) then it is an improvement. If the new
panel is the same as the old one it is a repair. I doubt if any one
will question which you choose as long as as you can rationalize your
choice
>
> 2) Water heaters reached their end of life (about 10 years old). I
> replaced them, rather than waiting for them to rust out and flood the
> finished basement. Repair or improvement?
>
> 3) Water heater rusts out, tenant has no hot water. Heater must be
> replaced. Repair or improvement?
If you were a home owner both would be considered as adding to the basis
(an improvement) - Also water heaters tend to improve (life, efficiency)
with each new model. A rust out could be justified as an a end of life
event.
>
> 4) I bought a building that needed substantial repairs (bank-owned,
> trashed by tenants, etc). I understand that all repairs prior to
> renting are improvements which have to be depreciated. Are all costs
> depreciated over 27.5 yr SL? Or can I break out new appliances, doors,
> flooring, etc. and depreciate at a faster rate such as 7 yr DDB?
Appliances are definitely short lived. Doors and flooring (but not
carpets) are long lived.
>
> 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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
|
Posted by removeps-groups@yahoo.com on April 11, 2008, 1:16 pm
Please log in for more thread options
> This one is a push. If the new panel etc is better (meets newer code,
> better access to breakers, etc) then it is an improvement. If the new
> panel is the same as the old one it is a repair. I doubt if any one
> will question which you choose as long as as you can rationalize your
> choice
Any panel today is probably better than one 10 years ago (better
efficiency, code, access to breakers, etc). But this would pretty
much mean that every replacement is an improvement, as (almost)
anything today is better than it was 10 years ago. So I think a fair
approach is to figure out the cost of the item 10 years ago, adjust
for inflation over 10 years (such as 10k becomes
10k*(1+0.03+0.045+...)=15k), and the amount over 15k would be a
capital improvement. But I doubt this is the way it is done as it is
so complicated. And besides, inflation is different for electrical
equipment than inflation in general, so what numbers would one use?
> > 2) Water heaters reached their end of life (about 10 years old). I
> > replaced them, rather than waiting for them to rust out and flood the
> > finished basement. Repair or improvement?
>
> > 3) Water heater rusts out, tenant has no hot water. Heater must be
> > replaced. Repair or improvement?
>
> If you were a home owner both would be considered as adding to the basis
> (an improvement) - Also water heaters tend to improve (life, efficiency)
> with each new model. A rust out could be justified as an a end of life
> event.
If it's EOL, then it's a repair?
> > 4) I bought a building that needed substantial repairs (bank-owned,
> > trashed by tenants, etc). I understand that all repairs prior to
> > renting are improvements which have to be depreciated. Are all costs
> > depreciated over 27.5 yr SL? Or can I break out new appliances, doors,
> > flooring, etc. and depreciate at a faster rate such as 7 yr DDB?
There can be different depreciation for different items.
--
<< ------------------------------------------------------- >>
<< 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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
|
Posted by Paul Thomas on April 11, 2008, 10:22 pm
Please log in for more thread options
>
>> This one is a push. If the new panel etc is better (meets newer code,
>> better access to breakers, etc) then it is an improvement. If the new
>> panel is the same as the old one it is a repair. I doubt if any one
>> will question which you choose as long as as you can rationalize your
>> choice
>
> Any panel today is probably better than one 10 years ago (better
> efficiency, code, access to breakers, etc). But this would pretty
> much mean that every replacement is an improvement, as (almost)
> anything today is better than it was 10 years ago. So I think a fair
> approach is to figure out the cost of the item 10 years ago, adjust
> for inflation over 10 years (such as 10k becomes
> 10k*(1+0.03+0.045+...)=15k), and the amount over 15k would be a
> capital improvement. But I doubt this is the way it is done as it is
> so complicated. And besides, inflation is different for electrical
> equipment than inflation in general, so what numbers would one use?
I think what you'll find is that - does the expense increase the useful life
of the entire structure (a replacement panel would not), or change the
use/purpose of the structure (from a 110v 42 circuit panel to a 277v box for
handling small industrial manufacturing equipment and machine loads). If it
does either, then it's an improvement to be depreciated. Or if it wasn't
there to begin with, and you are just now installing power to a structure,
it's an improvement.
Just replacing the panel is a repair, rewiring the whole house, maybe a
different story.
--
Paul A. Thomas, CPA
Athens, Georgia
--
<< ------------------------------------------------------- >>
<< 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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
|
Posted by way111 on April 12, 2008, 3:51 pm
Please log in for more thread options > I think what you'll find is that - does the expense increase the useful life
> of the entire structure (a replacement panel would not), or change the
> use/purpose of the structure (from a 110v 42 circuit panel to a 277v box for
> handling small industrial manufacturing equipment and machine loads).
The service itself wasn't changed - its the same amperage, same number
of circuits. It's breakers now instead of fuses, but there is really
no choice, I think that is a code issue.
"Does the expense increase the useful life of the entire structure"?
By this criteria, it seems like virtually everything is a repair. The
building's useful life should be at least another 50-100 years. No
water heater or window or roof or whatever will last that long. Is
this really the case?
I'm a bit confused by the end-of-life comment. Does waiting for
something to fail make it a repair?
--
<< ------------------------------------------------------- >>
<< 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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
|
| Similar Threads | Posted | | Income tax on "property repair allowance"? | November 4, 2006, 10:35 pm |
| Can I buy a foreclosure and repair the house with a Home Equity Loan? | January 15, 2007, 2:26 am |
| Would this be a Capital Improvement? | March 21, 2008, 1:34 am |
| Home Improvement , changing basis on form 4562 | April 10, 2007, 9:47 am |
| rental income + rental mortgage + rental mortgage interest - dazed /confused | April 11, 2006, 3:50 am |
| Re: Converting Rental to Non-Rental | March 23, 2008, 9:50 am |
| Rental Income | February 5, 2007, 1:51 am |
| ReFi of Rental | March 19, 2007, 2:42 am |
| vacant rental | March 26, 2007, 11:54 am |
| Rental deposit ? ? ? | April 3, 2007, 2:07 am |
|
|
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap