Storage Building

[geekgirldany]

I have a customer that wants to build a "storage building" on his property. His home is also on this property. He wants to store his equipment there.

When talking he said it would be the size of my garage which is a 3 car garage with a upstairs. I told him that it would be non-residential property to be depreciated over 39 years. He would rent it to the S-Corp. I want to make sure I am correct on the renting part. I sure I am correct on the 39 years. Below is from TTB

This is Section 1250 property, such as office building,
store, or warehouse, which is neither residential rental
property nor property with a class life of less than 27.5
years. Includes office in the home.
====
He strongly disagrees on the depreciating for so many years. I told him if it was a shed from lowes it would be different. But he is building a large building.

[Gretel]

I don't think it makes any difference if the building is rented to someone or has self use. If it is not a residential structure or any other special farm structure or easily transported some place else then it's 39 years of depreciation.

[ChEAr$]

Concur

I don't think it makes any difference if the building is rented to someone or has self use. If it is not a residential structure or any other special farm structure or easily transported some place else then it's 39 years of depreciation.

with Gretel. My S corporation client actually built the building although it is on his
personal lot, and as such 39 years it is.

[geekgirldany]

I appreciate you guys answering. I thought so but wanted to make sure. Most of the time people buy smaller sheds from Lowes or Home Depot. I could see them only lasting 7 years.
Now I have to make him understand.

[Black Bart]

Agree with

...Most of the time people buy smaller sheds from Lowes or Home Depot. I could see them only lasting 7 years...

Gretel and Harlan that it's 39 year property, but you raise an interesting related point/question which arises more frequently: What is the life of those small Lowe's/Home Deport tool sheds?

Most clients don't like the glacially-slow 39 years and neither do we, but is there a legitimate argument for less? There was a debate about it here a couple of years ago and some said 39, others 7-10-15 whatever, but I don't remember seeing a definite unanimous conclusion.

What are the factors (if there are any) which might be relevant?

On the face of it, it looks like 39 and that's that; but you mention "lasting 7 years." I don't see that cutting any ice with IRS, but is there a precedent on that somewhere?

Could they be considered to be consumable equipment like a lawnmower which might be worn out in seven years? Actually we also had a debate here last year about garden tool life -- I was surprised to discover that some here use five years while most favored seven.

Size? Is that a factor? Like your guy's 3 cars+upstairs storage garage; the fact that it's big seems to nail it down, but what about the small buildings? Is there any difference in a "shed" and a "building"? What constitutes "big"? Anything larger than a six foot tool shed? A "double-wide" shed?

Portability? Is that a factor? Gretel mentioned "easily transported."

Opinions?

[okie1tax]

I think I would look to the guidelines on service station canopies as a starting point. Even if the "shed" has a poured concrete slab, which would be 39 yr, the attached shed, I would argue, should be 10 or 15 yr. The "building" here though sounds more as is it is going up as permanent, i.e., 39 yr.

[Snaggletooth]

Down the Street

Keep us posted Geekgirl, if you can remember, as to how this turns out.

If he is building this thing from the ground up, he's looking at 39 years. Period.

My guess is that your customer will go down the street until he finds a preparer who will depreciate over 15 years. There's plenty of them who remember the old ARCS life of 15 years, and storage sheds which can legitimately be written off in 15 years.

Funny thing...if he asked his lawyer and was told 39 years, he would never question his attorney.

Personally, I think there would be more incentive to build if the IRS reduced depreciable life to something much less than 39 years but no one asked me...

[geekgirldany]

Talked to him today. He said he is just going to get a small shed. I told him I understand that 39 years is long but that is the law. I think it should be 15 years but that is not how it works.

We actually talked about it before and I told him I would double check.He said he knows that if he went to another accountant he would get a different answer. I told him to go to another one and see what they say. Take his tax returns and ask. He did not bring that up again.

As you say Snag there is always someone else down Canton Hwy