All Forum Posts by: Jennifer Bott

That clears everything up. Thank you!

The borel associates website posted mentions a written election is to be made to declare interest on Schedule E rather than Sch A.  I am having trouble finding a sample of this.  

I took a look at interest tracing rules, and understand the tracing of interest to different categories of activities (personal, business, passive activity, etc.) So I know that all of mine is traced to passive rental activities, but to allocate between the rentals themselves, I am thinking to breakdown the HELOC loan proceeds by amount borrowed per property, and calculate an exact interest paid amount for each, based on when I purchased each home.

I am still unsure about the 100K limitation. My HELOC loan is over 100K.

We took a home equity line of credit out on our personal residence, and used 100% of the funds to buy 3 rental properties.  My first question is whether the interest deductibility is subject to the 100000 loan limit. Secondly, assuming it is not since it was all business use, how would I divide up the interest expense between the properties, all separately listed on Schedule E?

We are having an underground oil tank removed on one of our investment properties, for $2100.  How is this treated for tax purposes?  Unsure if it's considered an improvement to land in which case I would have to add to basis and be unable to depreciate.    Or whether it would classify as improvement to the house, as oil tanks are part of the heating system.   If that is the case, I would expense it under De Minimus, as under $2500 limit.....   Any advice would be appreciated. 

Thank you.  I had seen conflicting posts on Sect 179 in the forum, but this clears everything up.   Now that the limits have been raised to $2500, I can take it all under DeMinimis Safe Harbor.  Thanks so much!

We replaced a hot water heater that stopped working for our tenant.  The cost of tank and labor amounted to $800.  From the research I did, it's pretty clear it has to be depreciated over 27.5 years as structural improvement rather than expensed.  I am now trying to determine whether I can Sect 179 it or not, and if so, what the disadvantages would be. It's easy to see the advantage of taking the full amount in the first year.  My questions specifically are as follows:

1. Does the tank qualify for Sect 179?  What are main disadvantages to using Sect 179?

2. If it qualifies and I elect this and take the full amount in year 1, if the asset breaks 5 years from now, I'm not clear on what the recapture laws would require me to do.

3. If I elect to depreciate regularly over 27.5 years, and it breaks in year 5, and has to be replaced, old tank having no resell value, then I would get whatever has not yet been depreciated, as a deduction in the year of disposal...?

4. For both 179 election and regular depreciation, I would be able to add the cost to the basis of the rental property?  I have been running a basis calculation and want to confirm in both cases I can add this in.

You mentioned in your January post that you were eligible for $1500 per unit credit since you hired someone out to do the de-leading.  My partner opted to get certified and do the work himself. Do you know what the difference would be for claiming credits, if any, in this case?   Also, since he started the work, the expenses have been minor so far (lead encapsulation paint, metal trim coverings for inside windows, tools to do it, etc.)  and rather spread out over several months.   Expensing as repairs just seems the right way to go, but not sure.  We began work in 2015, but won't get the certificate until 2016, or 2017 at the latest.   When we apply for MA $1500 credit, how do I account for the prior years expenses already deducted?

That helps tremendously, thank you!   Rev Proc 96-31 talks very specifically about how to fill out 3115 for those filing for missed depreciation.   Unless you know of another Rev Proc that is more updated on the specifics, I will focus more of my attention on the actual 3115 instructions.  

I found the 180 day rule in the Rev Proc 96-31, Section 5 as follows:   "A taxpayer makes a change in accounting method under this revenue procedure by completing & filing a current Form 3115 in duplicate.  The original of the Form 3115 must be filed with the...(national office) on or before 180 days after the beginning of the year of change and addressed to the Commissioner of Internal Revenue.  In addition, a copy of the Form 3115 must be attached to the taxpayer's timely filed return (including extensions) for the year of change."  

I am a licensed CPA, however never had to file this form, mainly doing gift & trust returns.  I am confident as to my basis calculation on the rental.   I am not sure what to do with this 180 days...  Please let me know your thoughts on this. I want to make sure it's not rejected. 

Hello.

I am filing Form 3115 to start depreciating (and to catch up on missed depreciation) a rental property that I have had in service since 2010. I assumed 2015 will be the year of change, since I am figuring this all out now and plan on filing my 2015 tax return by April 15, 2016. However the Form 3115 instructions say it needs to be filed on or before 180 days after the beginning of the year of change, which in my case would be June 30, 2015. My questions are as follows:

1. If June 30 is the date, then I missed it. However I read elsewhere that this is considered an 'automatic method change', and some say just to complete the form and file it with my 2015 return, in which case I haven't missed it. Can you shed some light on this?

2. If I did miss it and can't make the change in 2015, then I am guessing I have to continue NOT depreciating the property for the 2015 tax year, as to do otherwise would be to switch to a permissible accounting method, without permission. Boy, that is a mouthful....

3. And then if question 2 is the case, the question arises as to when to file the form 3115 to start the change for 2016. Can I file it now and get it over with, or should I wait till after January 2016?

Thank you for any insight you have to offer!