owner put in an adpter on meters to residences. For the first time this made it possible for him to bill the tenents for their individual usage. I want to 179 this investment, about $9,900 for the current year. My only reasoning is automated coin operated laundry facilities in a rental situation can be 179-why not this, he will make more than the washers and dryers can. Can it fit under that "hat"????
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Very interesting question.
My first thought was that the rental real estate rules disallowing Section 179 MAY come in to play. Without looking it up, I can't give you a definitive answer; and I do have a client that's a trailer park. The residents rent the land, not residential real estate, so I will be interest to see how your research comes out; I am not sure land improvements can be Section 179 either. Please post when you find the answer. (Or wiser posters jump right in.) -
lodging
>>The residents rent the land, not residential real estate<<
The land IS residential real estate. What else would it be? The meters are for the utilities to the homes, so they are a part of providing lodging and are not eligible for Section 179.
Coin-op washing machines are not the same thing. They are a separate business providing a personal service, not lodging.Comment
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Well... maybe it is like the definition of "is". The "adpter" (whatever that is) is equipment and the question maybe is was it really "used" in a rental property operation or an administrative funtion of his service business operation. He does not own homes or lodging property. Its not necessarily a black and white issue.Originally posted by jainen View PostComment
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colors are irrelevant
>>He does not own homes or lodging property<<
He owns the real estate where they all live. How is that not lodging? Oh I get it--it isn't a building. But the meters are part of the building, not the land, unless you employ a cost segregation study. And the meters are not for the coin-ops in the common utility room; they are for the individual lodgings.
>>Its not necessarily a black and white issue<<
True. If you just close your eyes, the colors are irrelevant.Comment
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I'll bet if you tell the client that they get the Section 179 deduction...
...and they also get to pay self-employment tax on the profit because they distorted the activity into a business,
suddenly the client will insist that the adapters are strictly rental and there was no business purpose whatsoever.
The closest thing I know of to a ruling on this issue is trailer parks. Having a laundromat does not automatically make the activity a business. Having a laundromat in addition to other services may make the activity a business depending on all the other facts and circumstances.
There is a materiality factor that courts discuss. If it looks like a rental, waddles like a rental, quacks like a rental, it's a rental. Adding a meter doesn't suddenly make it an ongoing trade or business.
An analogy is putting a magnetic sign on your car. It doesn't turn commuting into advertising expense.Last edited by Luis Mopeo; 04-24-2007, 11:32 PM.Comment
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>>And the meters are not for the coin-ops in the common utility room; they are for the individual lodgings. <<
Using that analogy would make all the utility companies "providing lodging" since they are connected to "that" building. There is no reason for anyone to be color blind to the fact that this taxpayer has no lodge to lodge.
This taxpayer is renting land and passing cost on to the customer. The only duck with this taxpayer is maybe on a pond. This is pure 1040 Sch-E rental of real estate held for income. This taxpayer does not have a "dwelling unit" to meet the classification of a "Residential Rental Property". Code §179 could be used to deduct the equipment.
Originally posted by 2007 RIA Fed Tax Handbook, paragraph 3141:Comment
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It doesn't have to be residential rental property for 179 to be disallowed.Comment
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