depreciation on rental cabinets
Posted 27 April 2008 - 08:09 PM
Posted 28 April 2008 - 11:19 AM
What life would you use for kitchen cabinets in a rental? 27.5 or 5 years?
How many years depreciation left on the house. I normally would use the 15 or 10 depending on the balance left on the house.
Posted 29 April 2008 - 12:04 PM
Posted 29 April 2008 - 12:43 PM
equipment, office machinery (typewriters, calculators, copiers,
etc.), automobiles, and light trucks.
This class also includes appliances, carpeting, furniture, etc.,
used in a residential rental real estate activity.
Posted 29 April 2008 - 09:27 PM
Posted 30 April 2008 - 06:36 AM
Posted 30 April 2008 - 10:59 AM
Those are not the only criteria. It is also a capital asset if it provides a new use, such as new (not restored) design or upgraded materials. That is more usual in owner-occupied than rental property, but lots of old rentals have functional obsolescence in the kitchen so are upgraded to fit current market demand. In that case the intention is to increase the rental value, which is clearly one of the tests for capitalization. (It does not have to be a "major remodel," which is a way to describe a group of repairs as well as a complete makeover.)
Posted 30 April 2008 - 05:51 PM
Posted 01 May 2008 - 11:28 AM
Posted 01 May 2008 - 04:32 PM
Posted 01 May 2008 - 04:48 PM
I agree with KC's analysis and definition.
Posted 01 May 2008 - 05:25 PM
Nashville, TN (for 1 more day)
Posted 01 May 2008 - 05:41 PM
Posted 01 May 2008 - 06:19 PM
Just the fact that you got so many different opinions here should show you that there isn't a cut and dry answer and you have an argument for using a shorter life than 27.5.
Posted 01 May 2008 - 06:31 PM
If we are talking about $3000 worth of cabinets, in a house that rents for $2000 a month, for example, that, to me, says 'REPAIR' very loudly. But if it rents for $200 a month, that might tend more to capitalization. And if the cost of the cabinets was $15,000, that also would at least tend toward capitalization. Even so, if it was only replacing cabinets, I'd go for 7 years, not 27.5, as fixtures.
Posted 01 May 2008 - 06:43 PM
In my opinion both of these statements violate professional ethics as established by Circular 230. The IRS is very clear that the possibility of audit can NOT be considered in determining a tax position. At the same time, the tax preparer has no obligation to document the client's circumstances (except when specifically required by the regulations). I support both of those Circular 230 proscriptions.
All you have to do is ask the client to describe the work done, including the reason. Repairs that are part of a major remodel must be depreciated, but that does not mean capital improvements not part of a major remodel can be expensed. Still, there's quite a bit of fudge room, and you can't assume that expensing is necessarily the "best" thing. For example, if the owner plans to sell or refinance, excessive costs on the financial statements may be a problem.
Posted 01 May 2008 - 07:30 PM
this reminds me of what I tell my tenants....you'll get heat when I get heat dammit! somehow they always get heat, while I'm still freezing from lack o'insulation and leaky windows though....
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