There was a sewer line collapse in a rental home. Had to dig up the cement, replace the line, etc. Total cost over $5,000. My first instinct is to depreciate it but I wonder if it would be a repair as they could not rent the house if they did not replace it.
So would it be expense or depreciation? If depreciation my initial instinct would be 27.5 years since this is residential rental and I would expect a sewer line to last that long.
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Seems to me you are just making the house usable again (don't think it could be rented w/o a functioning sewer line...) so I'd go with a repair. Unless in some way it is a substantial improvement, but seriously,.. how does one substantially improve a sewer line? Gold plate it?
Seems to me you are just making the house usable again (don't think it could be rented w/o a functioning sewer line...) so I'd go with a repair. Unless in some way it is a substantial improvement, but seriously,.. how does one substantially improve a sewer line? Gold plate it?
What's 2% of the unadjusted basis? I usually start with a "safe harbor" determination, then you get to ignore the BAR rules.
Rick
This is a repair.
I am even later. To argue for "repair": The unit of property is the entire plumbing system, not just the sewer line. I would argue the entire unit of property did not fall into disrepair, but merely a component. The unit of property includes all the water lines, water heater(s), sinks, toilets, baths, showers, drains, etc.
If you replaced a section of pipe in an easily accessible area (basement or crawlspace) for a few hundred dollars or even a thousand dollars, I would expense it as a repair. The problem with the sewer line is the high cost to access (dig out, fill-in, repair landscaping, etc). Expensing $5,000 as a repair just seems high. But again, I would argue a small component of the unit of property was replaced and so, properly expensed.
I guess it is a question of degrees when considering whether the entire unit of property as fallen into disrepair or just a small part of it has.
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