Class life of fitness equipment

[tst]

How many years should gym equipment be depreciated. Small startup gym? Plus purchase were made for mats bands and balls that have a useful life of more than a year but likely 2-3 years at best. Thoughts. The other equipment 5 or 7? I can't find a class life for gym equipment. I know 7 otherwise but 7 seems long for the major equipment. Any guidance would be appreciative.

[Lee B]

Any assets not specifically listed in the MACRS Class Life List is deemed to be 7 year property.

 

The gym equipment that only lasts 2 or 3 years will be dealt with by disposing of it, when it wears out

 

and is replaced. (Any remaining undepreciated basis will be written off on Form 4797.)

[tst]

Thank you....Do you agree 7 years? Much of the equipment is $300/$400 each some less like $130 exercise ball and section 179 not an option they appear to want to take. There is probably 30 items each between between $300-$400 that will likely last 2-3 years. Thoughts as depreciating each 7 years and knowing when they dispose could get to be a record keeping nightmare. Thoughts. Would you encourage them to section 179 the smaller items.

[tst]

I guess my question is grouping like assets into one depreciated item? It seems silly to depreciate bands balls and exercise mats but they will have a useful life over a year.

[tst]

True anything under $500 that us equipment could fall into the de minimus rules for supplies and not worry about section 179 or depreciating. Need to make election on sch c correct?

[Lee B]

Another possibility would be to follow the Repair Regs guidance on Materials & Supplies:

 

"A unit of property with an acquisition cost of $ 200 or less"

 

Example (7) Reg 1.62-3(h)

 

Alexco purchases 50 scanners @ $ 150 each

 

In the first year Alexco begins using 35 scanners and stores the remaining 15 scanners for use in a later year.

 

Result:  The scanners are non incidental materials & supplies

 

1.  $5,250 is deducted for the cost of the scanners used the first year

 

2.  $2,250 is recorded as prepaid supplies to deducted in a future year.

[Lee B]

True anything under $500 that us equipment could fall into the de minimus rules for supplies and not worry about section 179 or depreciating. Need to make election on sch c correct?

 

The supplies rule applies to things that cost under $ 200. If you adopt the $ 500 safe harbor then everything you purchase under

 

$500 is expensed in the year of acquisition which may not be the result you want in the first year of business.

 

Quite often deductions are more valuable in the second year of business.

[tst]

Thanks for help. Getting up to speed on cap/exp rules. think some could fall under $200 supplies but most are assets that cost under $500. The first year of business so we just elect on schedule c as no financing statement correct. So 1st year no 3115 as we are not changing accounting method obviously. Just make both elections and make sure they get a written policy?

[tst]

I agree on the deductions for later years. But many items are $200-$300 and depreciating 7 years and keeping track of when disposed seems like record keeping nightmare as most will not last more than 2 years. But I'll let the client decide.

Thanks for walking me through. The $500 safe harbor if elected is applicable to all equipment /supplies right?

[Lee B]

I agree on the deductions for later years. But many items are $200-$300 and depreciating 7 years and keeping track of when disposed seems like record keeping nightmare as most will not last more than 2 years. But I'll let the client decide.

Thanks for walking me through. The $500 safe harbor if elected is applicable to all equipment /supplies right?

 

Two different things Supplies & $200   -   Equipment & $ 500

[SaraEA]

Doesn't the $500 safe harbor apply only  to units of property (like windows in a building or a motor for a piece of equipment)?  The gym items are not units of anything. They are supplies, which have a safe harbor of $200. If each ball or mat costs less than $200, then count it as a supply. Otherwise, there's always Sect 179. But heed cbslee's warning that the deduction might not be needed in the first year of business but will be in later years.

[tst]

Thanks. What I was asking where this would fall. Mats balls likely supplies but dumbbells etc are they supplies or equipment. It's equipment that is part of gym but it is a unit of property? Other rowing machines were bought I depreciated those over 7 years.

Will re read definition of equipment. Insight on equipment definition?