Schedule "E" Rental Question

[RWG1950]

Customer rents out the other side of a side-by-side condo / duplex & files an "E".
The steps on the rental side were mud-jacked to raise & level them.
Customer incurred expense of $1,400 to have this done.
Should this amount be expensed on the "E" or added to house basis & depreciated ?
If depreciated, over 27.5 years, or use a lesser number of years ?
Thanks for comments.

[Rapid Robert]

Under Tangible Property Regulations, it seems this would be a repair, to be fully expensed in year money is spent. You could always elect Safe Harbor for Small Taxpayers (SHST) to be safe.

But if the taxpayer wanted to depreciate it for 27.5 years, I don't think anyone would object, except maybe a purist.

[RWG1950]

How does one make the safe harbor election you refer to for this real estate rental ?
Have looked for this at the IRS site and TTB. Do you attach a PDF to the e-filed return?
Am kind of at a loss on this.
Thanks for comments.

[Rapid Robert]

How does one make the safe harbor election you refer to for this real estate rental

https://www.irs.gov/businesses/small...SmallTaxpayers

The above link is from the IRS web site. (you may have to scroll up one or two lines to see the heading). I don't think you have to make the election in your case, as I said, but it would certainly nail it as a current year expense. Your professional tax software should have a checkbox of some kind to include this election with the return, if not it is time to look at some new software IMO. No, it is not a PDF attachment, it is a statement that is directly included in the efile data sent to IRS.

"You make the election to use the safe harbor for each taxable year in which qualifying amounts are incurred.

• The election is made by attaching a statement to your income tax return for the taxable year. See When and how do you make an election provided under the final tangibles regulations?
• An annual election is not a change in method of accounting. Therefore, you shouldn't file Form 3115, Application for Change in Method of Accounting, to make this election or to stop applying the safe harbor in a subsequent year.

"

[Burke]

How does one make the safe harbor election you refer to for this real estate rental ?
Have looked for this at the IRS site and TTB. Do you attach a PDF to the e-filed return?
Am kind of at a loss on this.Thanks for comments.

Go into the FORMS section of your software (within the return) just as you would pull up any form you want to add. Type in ELECTIONS and it should come up. There are hundreds of them. Select the one you want to add.

[TaxGuyBill]

I wouldn't bother with an election. To me, it is very clearly a repair.

On a related note, I make sure that all of my clients qualify for the De Minimis Election to potentially deduct improvements or assets up to $2500. You may consider doing the same. It is an annual election; you don't necessarily need to choose to make that election each year, but in most cases it is easier and more advantageous to take it so you don't need to bother with depreciating smaller items.

[HRS]

1040 Sch E Residential rental -hoe to report sale of rental home if the owner is qualify for 2 to 5

[TaxGuyBill]

HRS


The Instructions to Form 4797:



Exclusion of gain on sale of home used for business.


You may be able to exclude part or all of the gain figured on Form 4797 if the property sold was used for business and was also owned and used as your principal residence during the 5-year period ending on the date of the sale. During that 5-year period, you must have owned and used the property as your personal residence for 2 or more years. However, the exclusion may not apply to the part of the gain that is allocated to any period after December 31, 2008, during which the property was not used as your principal residence.

If the property was held more than 1 year after you converted it to business use, complete Part III to figure the amount of the gain. Do not take the exclusion into account when figuring the gain on line 24. If line 22 includes depreciation for periods after May 6, 1997, you cannot exclude gain to the extent of that depreciation. On Part I, line 2, write "Section 121 exclusion," and enter the amount of the exclusion as a (loss) in column (g).

If the property was held for 1 year or less after you converted it to business use, report the sale and the amount of the exclusion, if any, in a similar manner onPart II, line 10.


https://www.irs.gov/instructions/i47...40646042672416