Client has a rental that had a buckling, leaking basement. They virtually redid the whole basement at a cost of $7,000. Repair, depreciation, or add to basis? Thanks.
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I would say depreciate. It improved and extended the life of the asset. The one but I would consider would be if the property had been declared "unfit for occupancy" by the local health or building inspectors in which case I would argue it had merely be restored to function and was a repair.In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
Alexis de Tocqueville -
Agree
TTB 1040 Edition 7-6 contains a good discussion of how it is that the IRS has clarified the difference between a repair and an improvement. Even before the new guidance I believe the prudent course would have been to depreciate.
Per TTB 1040 Edition 9-14 rental use property is not eligible for Sec 179 election to expense. Does anyone know if real property can ever be expensed under Sec 179? For example, what if the basement were a home office in the taxpayer's home?Comment
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No. See same section TTB 9-14. Qualifying property is tangible personal property. Non-qualifiying property is investment (rental), real property, gift, inherited or trade-in property, and some addl situations.Comment
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simply put an improvement (depreciation) is anything with more than 1 year of life or that increases the value of the home. taxeaBelieve nothing you have not personally researched and verified.Comment
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Thanks to all. I thought depreciation was they way to go.Comment
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