Rental Property Appliances & the TPRs

[TomJ]

Sorry for the dumb question...

An appliance purchased for a rental property (washer/dryer, refrigerator, stove, etc.) is still considered an asset that is separate from the building and should be depreciated on its own, right? The new regs have no impact on these if I understand them correctly. The alternative would be to treat these as supplies, but that doesn't seem right.

Even the simplest things are making me think twice now.

[BHoffman]

Here are two of the examples listed in 1.263(a)-1(f), which is the "safe harbor election" for materials and supplies: For Example 1, think "appliances" instead of "printers". For Example 2, think "appliances" instead of "computers". Hope this helps. No form 3115 is required in order to make elections.


"Example 1. De minimis safe harbor; taxpayer without AFS.

In Year 1, A purchases 10 printers at $250 each for a total cost of $2,500 as indicated by the invoice. Assume that each printer is a unit of property under § 1.263(a)-3(e). A does not have an AFS. A has accounting procedures in place at the beginning of Year 1 to expense amounts paid for property costing less than $500, and A treats the amounts paid for the printers as an expense on its books and records. The amounts paid for the printers meet the requirements for the de minimis safe harbor under paragraph (f)(1)(ii) of this section. If A elects to apply the de minimis safe harbor under this paragraph (f) in Year 1, A may not capitalize the amounts paid for the 10 printers or any other amounts meeting the criteria for the de minimis safe harbor under paragraph (f)(1). Instead, in accordance with paragraph (f)(3)(iv) of this section, A may deduct these amounts under § 1.162-1 in the taxable year the amounts are paid provided the amounts otherwise constitute deductible ordinary and necessary expenses incurred in carrying on a trade or business.


Example 2. De minimis safe harbor; taxpayer without AFS.

In Year 1, B purchases 10 computers at $600 each for a total cost of $6,000 as indicated by the invoice. Assume that each computer is a unit of property under § 1.263(a)-3(e). B does not have an AFS. B has accounting procedures in place at the beginning of Year 1 to expense amounts paid for property costing less than $1,000 and B treats the amounts paid for the computers as an expense on its books and records. The amounts paid for the printers do not meet the requirements for the de minimis safe harbor under paragraph (f)(1)(ii) of this section because the amount paid for the property exceeds $500 per invoice (or per item as substantiated by the invoice). B may not apply the de minimis safe harbor election to the amounts paid for the 10 computers under paragraph (f)(1) of this section."

[BHoffman]

Also, please note that these are elections and not requirements. If you want to continue business as usual and capitalize the appliances, nothing prevents you from doing that. Simply forego making the election.

[TomJ]

So if the expenditure fits under the DMSH and the DMSH is elected, those purchases would be included in the Supplies portion of the Sch E?

[BHoffman]

That's the way I would report it.

[EdCEA]

What if an expensed appliance is sold

What if an expensed appliance is sold. Since not Sec. 1231, probably reported on Sch. E line 19 as a negative figure.
What do you think.

[BHoffman]

What if an expensed appliance is sold. Since not Sec. 1231, probably reported on Sch. E line 19 as a negative figure.
What do you think.

I don't know the answer to that, but if my client received $50 for the old stove and bought a new one for $540 (net = $490), I don't think I'd use the election to expense the new stove.