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Improvement to a commercial building, 39 year depreciation

Forum|Forum|5 years ago
August 19, 2020
12 replies
71 views

If you know the equipment isn't going to last 39 years, do you have the option to depreciate it for a lesser amount of time?

Ive got a client replacing the roof and HVAC ducting on a commercial building this year. The last time he did it was back in 2005, so the equipt lasted 15 years. (this was my ex-employers client and he set it for a 15 year depreciation back in 2005...how he knew it would only last that long, I have no clue)

Do I really have to depreciate this new equipt over 39 years when in all likelihood this will only last 15 years as well?

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Best answer by qbteachmt

Read this article, specifically the details starting after, "Most of the provisions within the AJCA were set to expire on Dec. 31, 2006"

https://rsmus.com/what-we-do/services/tax/federal-tax/confusion-over-qualified-leasehold-improvements-may-create-oppor.html

Oh, I had this one, too:

https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act

sjrcpa

Level 15

No you don't have the option of choosing a shorter depreciable life even when you know it won't last 39 years.

But, could these be expensed under the Repair Regulations?

Could they be classified as 15 year property?

Those more knowledgeable about these regulations please chime in.

The more I know the more I don’t know.

Just-Lisa-Now-

Author

Intuit Community Champion

The total hes going to spend is around 44K, the unadjusted basis of the property is low, only about 300K (bought in 1994) so lesser of 10k or 2% of the unadj basis, the 2% would only be 6K that could be expensed using the SHST election....is that what you're referring to as Repair Regulations?

So when my old boss did the 15 years back in 2005, he just winged it and did what he wanted, not what was allowed? (that sounds like him! I find funky stuff all the time leftover from him!)

Could they be classed as 15 year property? Thats what Im asking. LOL

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

qbteachmt

Level 15

Read this article, specifically the details starting after, "Most of the provisions within the AJCA were set to expire on Dec. 31, 2006"

https://rsmus.com/what-we-do/services/tax/federal-tax/confusion-over-qualified-leasehold-improvements-may-create-oppor.html

Don't yell at us; we're volunteers

T

TaxGuyBill

@Just-Lisa-Now- wrote:
Ive got a client replacing the roof and HVAC ducting on a commercial building this year.
Do I really have to depreciate this new equipt over 39 years when in all likelihood this will only last 15 years as well?

Yes, it is 39 year property. It does not qualify as 15 year Qualified Improvement Property. That is restricted to certain interior improvements.

IF the rental rises to the level of a "Trade or Business", it does qualify for Section 179.

However, ProSeries automatically assumes it is NOT a "Trade or Business", so if it does rise to the level and you want to use Section 179, you need to override Line 11 on form 4562 to factor in the rental profit/loss.

rbynaker

Level 13

See, he's like Batman! A snowman-kidnapping Batman.

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