Wondered if someone might verify the correct place to enter a new furnace t hat we installed in new rental house in the 1st 30 days of its purchase bef ore the rentail was availlable to rent. It Because the one in there didn't work it needed to be replaced before it was available to rent. TT indicates that one puts it as "remodeling" before it was available and then adds it in the home improvements basis figure (separated out of the total purchasem ent assessment) which isnt used for taxes but used when the the rental is s old. Then TT doesn't ask that it be added as a asset that is depreciated fo r 27.5 yrs. I just want to be sure I have it correct. Thanks
Barbara wrote in news: snipped-for-privacy@googlegroups.com:
First, IANAL and all that.
Second, I guess new regulations went into effect in 2014 that are discussed in Internal Revenue Bulletin 2012-14 (actual regulations are at 1.263(a)-2T and 1.263(a)-3T).
From the bulletin:
"Amounts paid for work performed on a unit of property prior to placing the property in service are related to the acquisition of the unit of property and, therefore, must be treated as an acquisition cost."
Now of interest is the phrase "unit of property" Under the new rules, unit of property has changed. In particular, I guess the heating/AC system is its own UOP.
So ISTM that both the aquisition cost of the building structure UOP and the heating/AC system UOP are capital expenses with class life of 27.5 years and depreciation of each beings when the rental is "placed in service". From a TTax perspective, I would want the building to be one asset and the Heating system a second asset.
You didn't ask, but I think you might also want to segregate out the cost or other basis of any items with shorter class life, such as appliances and landscape and depreciate them with the appropriate class life. So when the range craps out you can write off any undepreciated amount and also recover over the shorter class life period.
I haven't started on my 2015 taxes yet, so don't know how TTax presents the rental step-by-step (and I have gotten by with deluxe in the past which has been good enough for me).
So that's my .02 for what it's worth. I have been a rental real property landlord for 30 years (just 2 or 3 properties) and haven't had any IRS troubles so far (knock on wood).
Thanks for the response. I agree as it made more sense to me to list it as an asset for depreciation as I'd done wit the new roof. The language of the tax bulletin made it seem confusing with the before available date and TT didn't make it easier.
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.