Posted by JHyre in Ohio on April 23, 2002 at 07:10:44:
Steve,
Good answers all, I certainly appreciate the help! Allow me to differ on what constitutes a trade or business, as opposed to mere investment activity…I think that the threshhold of required activity is quite low (e.g.- active or material involvement). For you laymen out there, this is important for getting 179 deduction, ordinary losses (on 1231 property) and other issues.
Steve, please keep on posting…perspectives & opinions other than mine on these gray issues are quite valuable.
If I purchase a SFH can I depreciate all of the appliances seperate from the house and use a depreciating schedule other than the 27.5 years for property? I found this excerpt on Inc.com and wondered if it applies to the RE business.
“A valuable tax break creating an exception to the long-term write-off rules is found in IRC § 179. A small business can write off in one year most types of its capital expenditures, up to a grand total of $24,000 (in 2001). All profitable small businesses should take full advantage of this provision every year.”
Yes, the appliances should have their own line item on the depreciation schedule as their depreciable lives are less than the house. Appliances have a depreciable life of 5 years.
Section 179 is an election allowing a taxpayer involved in a “trade or business” to immediately write off up to $24,000 in depreciable property such as appliances (not real estate) in one tax year. However, unless you are considered a dealer in real estate for IRS purposes, you probably cannot use this deduction since it is allowed only for a “trade or business”.