Income tax depreciation or capitalization question

[TerryinMD]

Oh dear... my hair is starting to hurt!!! /forums/images/graemlins/shocked.gif

Ask what I think is a simple question and I get more that I expected - my problem not the responders!! One part of the original post was that I purchased the fill last year and was expecting/hoping to begin the process of writing off the expedure. Now, I have to think about this some more. What is the better way handle the situation tax wise. Having you own business is great except when you have to make a business decision. /forums/images/graemlins/tongue.gif Mommy!!!!!

You guys are giving me great answers. Just have to digest and figure it out. More ideas or suggestions are welcome.

One can always get great info from the TBN gang!!! /forums/images/graemlins/cool.gif /forums/images/graemlins/smile.gif /forums/images/graemlins/cool.gif /forums/images/graemlins/smile.gif

Terry

 

[Junkman]

To be honest, one would have to know the nature of the business and more of the organizational facts to make a judgment call. An example is "when is a 1 year car rental deductible as a business expense?" The answer would depend on your occupation and if a car is necessary to doing your occupation. When it comes to the tax laws, nothing is black and white, but many shades of gray.

 

[Alan L.]

Jpr, yes, if the dirt work is considered part of the cost of the land this increases your basis in the land. So if you sell it, your gain would be less. And, if this is part of your residence and the total gain is less than $500K either way, this would be of not benefit. But typically barns used in a farm business are not part of a residence. Instead they are trade/business assets.

This is really splitting hairs. Reality is, that if I were preparing the return and the cost of the dirt was buried in the building, and happened right at the beginning of the construction, I would not question the nature of the work, but would assume it was foundation work and would add it to the cost of the building. If an agent had nothing better to do than break down each individual expenditure related to the construction of a barn, he might identify it, and propose an adjustment to reclassify it to the cost of the land. I believe the situations where such work should truly be considered as land cost is when you knock the side of a mountain off to build a mall. In fact there are cases where this happened and the cost was considered part of the land. But this is hardly a mountain here, apparently.