Client bought a used RV camper and stationed it at the storage facility they own. They do not travel with it and is has no personal use. It was purchased mainly to eliminate hotel costs when they travel for business. I came up with 39 years and no bonus depreciation which is not ideal for taxpayer as bonus would be better. Camper meets IRS Pub 527 definition of a "dwelling unit" and was placed in service in a commercial business (39 years). Any thoughts on how the taxpayer could get bonus or more accelerated depreciation.
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Sounds like it wasn't placed in service yet...???This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content. -
What is the entity type of the business (is the client an employee?) Is there travel with family members?
Another twist is that the RV is listed property, although if it meets the 50% business use requirement that might not be limiting for depreciation. But I would be sure to show it as listed property in Part V of Form 4562.
"It was purchased mainly to eliminate hotel costs when they travel for business."
This can't be the whole story. Prior to purchase, how did they travel from their tax home to the hotels they stayed at for business?
I don't think the "dwelling unit" description from Pub 527 has any direct bearing on this situation.
"They do not travel with it and is has no personal use" Well, how could they say anything else to you? I personally always find it suspicious when a business makes a purchase like this that is only a marginal reduction in expense at best. RVs are very expensive to maintain from everything I've read, and driving instead of flying to overnight lodging seems like it would offset any savings from hotel bills. I'm not saying it's our job to pre-audit the client, but I suspect this client would not be a good fit for me (in fact I had to disengage with one of my first S-corp clients when they wanted to fully write off their second business-use RV in 3 years).
"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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The entity is a partnership. The partners use the RV and would formerly travel from their home in Sarasota to Jacksonville (where the RV is permanently stationed) and stay in hotels. But now they stay in the RV instead of hotels and the RV is used 100% for business for the purpose of staying or lodging. The RV has been placed in service.Comment
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Oh, now I understand. They don't ever use the RV as transportation, but only as stationary lodging. Kind of like if they had bought a condo for the same purpose. Or a boat that never left the dock.
So back to your original comment, yes I agree this is a business-use dwelling unit. Even though it is not real estate, I suspect the useful life for depreciation will be comparably long, but I have no citations to back that up. I'm sure some would go ahead and show accelerated depreciation deduction for this property without hesitation.
Additional random thoughts: I wonder how you measure percent of business use, assuming there are zero miles driven per year?
Do local ordinances or licensing requirements allow for the business to provide commercial lodging on its property?
If the RV is converted from business use to personal use someday and accelerated depreciation was previously allowed, would there be recapture?
"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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Here is an interesting article from the Braford Institute on the subject.
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Originally posted by Florida_EA View Post
It is not "real" property (real estate, such as a building permanently attached to the ground). Therefore it is not Section 1250 property, therefore not 39 years.
It would either be 5 years (vehicle) or 7 years (everything else). Both would qualify for Bonus.Comment
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Yeah, probably right about 7 year property and bonus depreciation. That's the "great" thing about bonus depreciation, you can acquire an asset one year, write it off 100%, and then convert it the next year to personal use with no consequence.
As usual, however, this becomes a matter of the tax tail wagging the dog. If the taxpayer in the OP writes it off 100% in the current year, then in future years they will have not only no depreciation write-off but also no hotel bills to deduct.
So many people wrongly believe the tax deferral is the same thing as tax savings."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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