Depreciation of Mulch Cost

[Florida_EA]

Mulch costing $10,000 was added as improvements to a multicomplex apartment unit. Is the cost of mulch depreciated or expensed?

[Rapid Robert]

Mulch costing $10,000 was added as improvements to a multicomplex apartment unit. Is the cost of mulch depreciated or expensed?

Follow the Tangible Property Regs.

Although I do wonder, is mulch real property, or tangible personal property? I'd treat it the same as new sod, in case there are any guides out there regarding that.

[Twin Turbo Z]

I would expense it. Mulch is a yearly expense. At least in our area. Maybe in sunny florida it lasts 3 or 5 years

[geekgirldany]

I would expense as well. It being a apartment complex I don't expect it to last 6 months before some has to be replaced.

[Rapid Robert]

I'm curious, regarding the last two previous replies, how the TPRs were applied to come to this conclusion. I'm not disagreeing, it sounds good, I'm just wondering whether the TPRs cover this situation (I suspect they do), or is this something completely unaddressed anywhere in the code or regs? I'm gonna look for some TPR flowcharts somewhere around here.

[geekgirldany]

I was looking at the "What is the facts and circumstances analysis for distinguishing capital improvements from deductible repairs?"

https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations

The steps listed leaned me towards expense... of course I maybe wrong.

[Twin Turbo Z]

Lets not over-think it. Its mulch . If one feels they need to depreciate mulch, then grass seed to patch bare spots should be also ! With grass seed it grows and lasts longer than mulch. If you feel it needs to be depreciated tell the client to hire a landscaping company and "expense" it, in future years. Not trying to be a butt, but.

[Anarchrist]

tell the client to hire a landscaping company and "expense" it, in future years.

If something is expensed or capitalized doesn't depend upon who installs property or makes the repair.

[Twin Turbo Z]

If something is expensed or capitalized doesn't depend upon who installs property or makes the repair.

Yes I understand that. There is a difference between a contractor putting up a building, wall, or sidewalk vs. yearly landscaping costs.

[Gretel]

Here are my thoughts:

This mulch is probably part of landscaping and as such should be added to landscaping costs. The apartment complexes I work for spend around $100,000 for original landscaping (including mulch), which is capitalized as land improvement.

The argument you need to replace at least some of the mulch within the year and therefore the original placement of the mulch is an expense, is a poor one. You might as well say in an area that gets a lot of hail, you expense the original roof because shingles need to be replaced next summer (I know - but still).

This is certainly a judgement call and I do not believe we have all facts.

[Rapid Robert]

Here are my thoughts:

Thank you. I think instead of just classifying expenditures according to gut feel, we should be able to provide reasonable basis for positions we take on the tax return.

Is the $10K mulch expense going to be an annual expense? Or is this something that will become part of the real estate?

[JON]

I do not think mulch would ever be a long term investment!!! Improvements would be essential every year or so!! Supplies!!!!

[Anarchrist]

Does the apartment complex capitalize or expense the thousands of dollars it costs to paint apartments each year between tenants? Does it capitalize the water used to water the lawn, trees, and flowers? Does it capitalize or expense the fertilizer costs for the landscaping?

[Rapid Robert]

Does the apartment complex capitalize or expense the thousands of dollars it costs to paint apartments each year between tenants? Does it capitalize the water used to water the lawn, trees, and flowers? Does it capitalize or expense the fertilizer costs for the landscaping?

I don't know, does it? Where would I find published guidance, regs, or law to support the tax treatment of such expenditures? Do only the experts in this forum know the answer, from an unspecified source of wisdom? :-)

[Twin Turbo Z]

I don't know, does it? Where would I find published guidance, regs, or law to support the tax treatment of such expenditures? Do only the experts in this forum know the answer, from an unspecified source of wisdom? :-)

Amen brother