Client rents out dairy farm to son. Rental includes a house, land, 2 barns and some machinery, son has own dairy cattle. It was set up on a Sch. E. Client (and myself, not real familiar with farm rentals) want to know if and how the machinery should be listed for depreciation purposes and whether it should be on a 4583 instead.
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A Bigger Problem
Taxguy, there is a bigger question than any of these that you ask - namely, he is renting to a "related taxpayer." This commonly means he is not charging market price for the rent, and even if he is, he may not be successful in collecting it. This can cause client to have to claim as income whatever rent was received without deducting ANY operating expenses. Brutal, but check out authors' comment "Did You Know" on page 7-7 of TTB.
I think you are asking about a Form 4835. This only applies if the amount of rent is based on farm production.
If you look at the check boxes at the top of Sch E, you should probably check one for the residence and another for land, and report two different kinds of rentals. And you are indeed entitled to depreciation on all the depreciable items to which the tenant has access and rights,
unless my first paragraph above applies.
Personally, I wish every state had a law against renting real estate to relatives. These situations cause tax laws to be twisted, economic disasters and enmity among family members. Guess I'm stepping on some toes here so I'll shut up. -
Unfortunately, this approach penalizes all the honest ones trying to do things right. The end result is sort of like beating the good son because the bad one messed up. You know, how the IRS treats the honest preparers.Originally posted by Snaggletooth View Post
LTOnly in government or politics is a "cut in spending" really an increase. It's just not as much of an increase as they wanted it to be, therefore a "cut".Comment
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