Metal Storage Building

[mammondee]

Client purchases a used metal storage unit for $1200. The shed is sitting on the property of a building he purchased early last year. How do I depreciate?.....Could it fall under any De Minimis rules?

[taxea]

what is the metal storage building being used for?

[mammondee]

what is the metal storage building being used for?

The storage shed holds supplies for the rental building the the client owns and rents out. It also has a mower for he uses to mow the property (all business), building materials from a recent remodel of the property. The shed was "moved" into its current location. It is not anchored and is NOT sitting on a concrete pad. It sits on skids on the dirt.

[Roland Slugg]

7 years. IMO it falls solidly into the large "unclassified" description of property with no class life and isn't specifically assigned to any other MACRS class. Code §168(e)(C)(3)(v)

[Golden Rocket]

Land Improvement

I would classify that thing as a land improvement. Having said that, I don't know whether there is such a MACRS category for it, and if not, Roland would be correct.

[Lion]

Depending up what election he had in place before the year began, he could expense as much as $2,500.

[taxea]

I would classify that thing as a land improvement. Having said that, I don't know whether there is such a MACRS category for it, and if not, Roland would be correct.

Sounds like a business equipment storage shed to me. I would take it as a expense under the new rule, if it qualifies. If not then depreciate for 7 years.

[mammondee]

There is mention to expense it "if it qualifies". My big question is do you guys really have small business clients that "have a written policy in place at the beginning of the year" as to how and what they will expense, and if you do was it for $2,500? My clients send me a quicken file (if I'm lucky) and ask me to make any necessary adjustments....which as you know are numerous. They rightfully expect me to make the decisions that would benefit them the most with the remaining business transactions. I have started writing the elections for my small business and having them sign it and "file it with their important papers".....However, that has even come to bite me because of the downturn in the oil field. I have clients that have losses that I really wish we could depreciate items under $2500 and save the depreciation deductions for future years as oil comes back. However, it the de minimis election was in place at the first of the year....all items that qualify must be expensed.

[TaxGuyBill]

"have a written policy in place at the beginning of the year"

It does not need to be written. However, for audit protection, I recommend having them fill something out that says "As of the date of x/xx/xx (Jan. 1st, 2014 or earlier is ideal), my accounting procedures is to deduct all items under $xxxx ($2500 or more is ideal)". It can be a 'memorandum' type of thing saying that is how it has been for many years.

However, it the de minimis election was in place at the first of the year....all items that qualify must be expensed.

The non-tax "accounting procedures" need to be in place at the beginning of the year, not the de minimis election. The de minimis election is an annual election that YOU can decide if you want to use or not (with the taxpayer's permission). Having the non-tax "accounting procedures" in place at the beginning of the year just gives you the OPTION to claim the de minimis election, it does not require that you make the de minimis election.

[taxea]

Quote: They rightfully expect me to make the decisions that would benefit them the most with the remaining business transactions.

I don't make decisions for any of my clients- I make recommendations, explain the pros and cons and they make the decisions on how to proceed. All within the rules, of course. If anything is not kosher I explain why it can't be done the way they want to do it and if they insist they are welcome to find another preparer.

[mammondee]

[/Quote]The non-tax "accounting procedures" need to be in place at the beginning of the year, not the de minimis election. The de minimis election is an annual election that YOU can decide if you want to use or not (with the taxpayer's permission). Having the non-tax "accounting procedures" in place at the beginning of the year just gives you the OPTION to claim the de minimis election, it does not require that you make the de minimis election.[/QUOTE]

Thank you for this clarification. Sometimes I can't see the forest for the trees.....