Farmers and the new repair regulations

[tpnl]

Who has farmer clients? We are trying to decide what to do with repairs to equipment and evaluating the UOP of each repair. It looks like some of those will need to be capitalized, and we are thinking we can take SEC 179 for those (assuming all qualifications are met, of course). What do you think about taking Sec 179 for equipment repairs?

When looking at Pub 946, chapter 1, page 13 (how to treat repairs) "If you improve depreciable property, you must treat the improvement as separate depreciable property. Improvement means an addition to or partial replacement of property that adds to its value, appreciably lengthens the time you can use it, or adapts it to a different use. You generally deduct the cost of repairing business property in the same way as any other business expense. However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it."

Chapter 2, Electing the Section 179 does not exclude equipment repairs from qualifying.

Any thoughts? Actually, this would effect any client with equipment that needs major repairs.

[TXEA]

The vast majority of the repairs that farmers make will be deductible. Don't beat this issue to death. As an example, a 22000 transmission overhaul on a tractor is deductible. If you replace the transmission, then capitalize. Just because a repair is over $500 does not mean you HAVE to capitalize.

Look at the UOP and look at the repair expenditure. Did the expenditure keep the property in normal operating condition OR did the expenditure put the property in operating condition?

If keep, expense
If Put, capitalize

I'll elaborate more if you need later.

[TAX4US]

One of my farmers had a seal on his skid loader bad. Sucking up 2 quarts oil per running hour. To put seal in had to loader dawn near in half. $8.00 sear was a 2100.00 repair. WRITE OFF here I come. Most of my farmers repair things. Doesn't necessary make them better. Just keeps em working.

[ToledoEd]

When looking at Pub 946, chapter 1, page 13 (how to treat repairs) "If you improve depreciable property, you must treat the improvement as separate depreciable property. Improvement means an addition to or partial replacement of property that adds to its value, appreciably lengthens the time you can use it, or adapts it to a different use. You generally deduct the cost of repairing business property in the same way as any other business expense. However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it."

Chapter 2, Electing the Section 179 does not exclude equipment repairs from qualifying.

Any thoughts? Actually, this would effect any client with equipment that needs major repairs.

When I just read this it hit me that putting gas in my car fits this description and maybe I should capitalize it. A full tank is worth more than an empty tank, and the additional fuel certainly lengthens the time I can use the car.

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