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Storage Unit

MGC94
Level 7

Taxpayer owns a storage unit (sch C) 

He added a new building to it to hold more units 

The cost of the building was $46,671. Taxpayer put down a deposit of in March of $5,500. He paid the remaining balance in June.

What is the best way to take this write off or correct way? 

Thank you for your help...  

 

 

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IRonMaN
Level 15

You start depreciating the asset once it is actually put into use.


Slava Ukraini!

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8 Comments 8
IRonMaN
Level 15

You start depreciating the asset once it is actually put into use.


Slava Ukraini!
MGC94
Level 7

@IRonMaN J1 - 39/40 nonresidential/commercial real estate?

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IRonMaN
Level 15

Yes


Slava Ukraini!
BobKamman
Level 15

1) You start depreciation when it is available for use. 

2) Storage units can qualify as “tangible personal property” under the U.S. tax code because they are considered movable and not permanently attached to the land. This classification allows self-storage facilities to benefit from a shorter depreciation schedule. Instead of depreciating assets over the standard 39-year class life for commercial buildings, storage units can be depreciated over just seven years, resulting in significant tax savings.

https://engineeredtaxservices.com/capitalize-on-tax-planning-opportunities-in-self-storage-industry/ 

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IRonMaN
Level 15

The storage units in my neck of the woods consist of buildings anchored to a concrete slab so they aren't very movable.


Slava Ukraini!
MGC94
Level 7

If the new units installed happen to be moveable (I will ask my client) what type of asset would it be on the asset entry worksheet for it to be 7 years? 

 

7-year property—Because storage units are considered tangible personal property, they can often be classified as seven-year property.

 

He rents the units out to people

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qbteachmt
Level 15

Moveable doesn't mean portable, like trailers. It means more like sheds on a slab, not solid walls with footings and foundations and crawl space mechanicals. Sometimes it's just framing and steel sheet siding, no insulation. It's important to understand the type of building. They range from concrete block multi-level buildings to steel shed-looking garage rows with rollup doors (for car or secure storage) and even just open bays (RV and boat storage) and parking areas behind a fence. For instance, a client had one entire side of their building encroached on by a BP fueling station, and lost their easement right on that side, so the doors were removed and steel siding closed off that side. Record and document storage rented to businesses will be climate controlled and even have fire suppression systems. There may be an on site manager residence, card controller gates for self-entry. That's why a segregation study would be useful in a large facility. A lot of the older places are just leftover machine sheds. The industry is lucrative because of these tax treatments.

Your taxpayer's investment seems fairly low, so it's likely going to be some simple outbuilding shed type of structure.

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Terry53029
Level 14
Level 14

My understanding of Tangible personal property contrasts from real property (or real estate), in the sense that real property is immovable and is permanently attached to a single location. Any storage buildings I have ever seen are not movable, and are attached to the land even the metal ones, and would not easily be moved. To me it would be a stretch to call a storage building Tangible personal property, but I suppose there are a few CPA's out there that would agree with @BobKamman