Need Help With Depreciation

[veritas]

There was an actual case

that is I believe exactly the same situaion. The life and method stayed same except the schedule it went to. I read it in the last year.

[Gene V]

You guys (Oldjack and Jainen) are so good, you make me sick.

When I can't even answer a depreciation question like this, makes me want to get
out of the tax business.

[Gretel]

You guys (Oldjack and Jainen) are so good, you make me sick.

When I can't even answer a depreciation question like this, makes me want to get
out of the tax business.

Gene, you are totally correct on this one. Let's get drunk together and NOT compare to the real good ones. I sometimes wonder how many real good ones are working at the IRS.

[veritas]

Ok you all ignored me

I say it could be 27.5 year property

The portion of a taxpayer¿s apartment used by the taxpayer as a home office should be depreciated as residential rental property, if the taxpayer owns the apartment building in which the apartment is located and 80 percent or more of the gross rental income from the building comes from dwelling units. CCM 200526002.

A taxpayer owns an apartment building containing eight essentially identical apartment units. The taxpayer lives in one of the apartments and leases the other seven to tenants who use the apartment units as dwelling units. The apartment unit that the taxpayer occupies is 1,200 square feet. The taxpayer exclusively uses 200 square feet of the apartment for a home office for a single trade or business. The taxpayer satisfies the requirements of Code Section 280A for deduction of the expenses of a home office including expenses for depreciation.

The question arose whether the portion of the taxpayer¿s apartment used by the taxpayer for a home office should be depreciated as residential real property or non-residential real property.

The Office of Chief Counsel advised that, to the extent that the taxpayer is entitled to depreciate for the home office portion of the apartment unit, the taxpayer should calculate depreciation based on treating the unit as residential rental property. Code Section 168(e)(2)(A)(i), the Office of Chief Counsel noted, the term ¿residential rental property¿ means any building or structure if 80 percent or more of the gross rental income from such building or structure for the tax year is rental income from the dwelling units. Code Section 168(e)(2) defines property as residential rental property by reference to a building or structure and not to a dwelling unit or a portion of a dwelling unit. In contrast, Code Section 280A(a) provides that no deduction is allowed to a taxpayer with respect to the use of a dwelling unit that is used by the taxpayer during the tax year as a residence.

Thus, the Office of Chief Counsel explained, for a building to be residential real property it must contain at least one dwelling unit that is actually rented to provide living accommodations. If the building satisfies this threshold test, then 80 percent of the gross rental income test is applied. Under the facts of this case, the Office of Chief Counsel said, the taxpayer owns the entire apartment building. Of the eight apartment units in this building, the taxpayer leases seven units to tenants who use them as dwelling units and occupies one unit. A portion of the apartment unit occupied by the taxpayer is used exclusively as a home office and the remainder is used as a personal residence. Even though the rental value of 200 square feet of the apartment unit used by the taxpayer by a home office is not treated as rental income from a dwelling unit, the entire building satisfies the 80 percent test for treating the building as residential rental property. Code Section 280A does not require a taxpayer to carve out a non-residential real property portion from a building that is residential rental property. Consequently, the Chief Counsel¿s Office stated, to the extent that the taxpayer is entitled to depreciation based on treating the unit as residential rental property and using a 27.5-year recovery period ¿ or a 40-year recovery period if the alternative depreciation system applies.

OBSERVATION: The Office of Chief Counsel cautioned that in the case of a taxpayer who uses a portion of his or her personal-use single-family residence for a home office the residence is not residential rental property because the residence is not used to provide living accommodations on a rental basis.

[OldJack]

Good point Veritas!! It sounds like in this case Jainen could be "dead wrong" and the depreciation schedule could just continue. That, as I understand your post would be because this was/is an overall residential rental building rather than a residence?

[Black Bart]

Congratulations on

Why, that's the very thing I myself try for every day!

your remarkable character transformation. Just the other day, a puzzled colleague mentioned you and we had this nice chat:

PC: That jainen just no longer seems himself. I'm not sure exactly what's happened, but it must have been something deeply profound -- perhaps a religious conversion or something of that nature. Do you suppose God has spoken to him?

BB: Possible. More likely his wife got tired of his crap and spoke to the side of his head with a frying pan.

PC: Be reasonable! He's been stuggling mightily for months now to maintain a calm, soothing demeanor and, while it's possible he may simply be mellowing with age, I feel he deserves full credit for this striking achievement. Why, he's been so pleasant and amiable lately, that I find myself...well...almost liking him.

BB: Okay, I'll give you this -- it's true he's overcome his "inner SOB" and is on the road to normal social relations with the rest of world, but he could still backslide any minute. Besides, didn't you, just a few months ago, call him an arrogantly abrasive, know-it-all #%$&@# who was "looking out for number one"?

PC (Blushing): Take that back! I never said any such thing -- I merely observed that he was an extremely self-confident, knowledgeable, and flamboyantly colorful "lone wolf."

[OldJack]

I agree with Black Bart... It is amazing!

I have tried my best lately to get a few insults out of him with zero success. I came real close on this thread and another one where I only got his hateful glare.

[jainen]

Fiddlesticks!

>>this was/is an overall residential rental building rather than a residence?<<

Fiddlesticks! The esteemed Chief Counsel is talking about 80% of the space, not 80% of the time. I'll stake my pithyness on an assumption that this is SFR (that's jargon for single family residence), not an apartment building.

After starting this thread, Kram has only responded once and that was to tell ME that I made sense and was right and something about finesse, so THERE.

[OldJack]

Black Bart you really did a job on Jainen. His post are still so sweet they flow like molasses.

[Black Bart]

I know.

Black Bart you really did a job on Jainen. His post are still so sweet they flow like molasses.

It's very frustrating, isn't it? I just can't seem to get a rise out of him. But maybe if you kept after him, you might provoke him into cussin' -- he's been boycotting me and not speaking ever since I extracted an undue apology out of him over that "race car" post a couple of months ago (he nurses his grudges until they die of old age).

[Black Bart]

Okay,

I'll try again.