Pool repairs

[ChEAr$]

Just goes to show ya', haven't seen them all yet.

Client has rental property down on the redneck riviera (Panama City, FL).
One of the properties required extensive repairs to the pool, about $ 2,800 worth.

First reaction here was that it IS a repair since couldn't rent the condo without a
swimmable pool. As an expense it was enough to push his loss over the $ 25,000 magic
number and therefore postpone any excess expenses well into the future.

But, if it is an improvement, betterment, etc, and capitalized over 15 years (land improvements), this will
simplify things down the line.

of course any decision shouldn't be based on the last paragraph, but still.......

WWYD?

[Burke]

It's a repair, unless he enlarged the pool, put in more stuff (like diving boards, slides, etc) added better equipment, filtration system, and so on. If he just restored to former usable condition, I would list as repair.

[snowshine]

I would definately depreciate: I have several rentals I am currently representing with the IRS (I represent an HR Block district) and they seem to have recently adopted a policy of challenging anything remotely possibly resembling an improvement should it be expensed for the year in service. A couple of my clients had the foresight to take before and after photos and they are going to win their argument, but the other 2 are going to get hit with a tax bill and likely future audits

[travis bickle]

agree totally

It's a repair, unless he enlarged the pool, put in more stuff (like diving boards, slides, etc) added better equipment, filtration system, and so on. If he just restored to former usable condition, I would list as repair.

with Burke here.

Repairs do not equal Improvements [as best I can recall].

[ChEAr$]

I would definately depreciate: I have several rentals I am currently representing with the IRS (I represent an HR Block district) and they seem to have recently adopted a policy of challenging anything remotely possibly resembling an improvement should it be expensed for the year in service. A couple of my clients had the foresight to take before and after photos and they are going to win their argument, but the other 2 are going to get hit with a tax bill and likely future audits

After getting more information from client as to the extent of these "repairs", I've decided on depreciation the expenditure, and here's why.

The expenditure prolongs the life of the item, and hence must be capitalized according to IRS own publication 946. Not doing would have rendered the pool useless and such material projects are usual on an average of ten years in that area of the country; maybe all over for all I know.

Thanks to all who responded. I owe you one.

[Gretel]

Somehow I always struggle with the term "extended life" of an asset, otherwise not being inhabitable.

What really is the difference to a plumbing (toilet repair)? The whole building is uninhabitable right away and it sure extends the life of the toilet. A hole in the roof renders a building uninhabitable (at least if it rains or snows) and once it is fixed entends the life of the building.

What is the key here? I am sure there are other examples like these..

[S T]

Itemize

Maybe instead of looking at the total figure for either repairs or capital, you can look at each of the expenditures. Somehow clients just don't know or provide the information in the wrong format.

Maybe, part is repair (expense) and part is improvement (for depreciation).

Sandy

[taxea]

I seriously doubt that a unusable pool renders the residence uninhabitable. Nor does a leaky roof. Perhaps an inconvenience for not being able to use that room or pool until repaired and the owner could easily lower the rent for the period of time that either is unusable or even by fence or lock prohibit access to the area.
If this is a safety issue then it is a repair. If it does not raise the value of the property then it is a repair. It is meant to maintain the value of the property not increase it.

A full roofing job may be considered an improvement because it has an increased life but fixing a hole in the existing roof is a repair.