info
Google Groups no longer supports new Usenet posts or subscriptions. Historical content remains viewable.
Dismiss
Tenant Walks Out - What is deductible?
73 views
Skip to first unread message
njoracle
Oct 5, 2017, 11:48:35 PM10/5/17
to
A tenant was renting an apartment and paying rent. As part of the deal, tenant paid electric and
water bills. For 6 months, tenant only paid two months of rent and did not pay any of the electric
or water bill. Tenant is now gone. I have to pay all of the past due electric and water bills plus
the water and electric bills for the rest of the year assuming I don't get a new tenant until January.
Are all of the expenses for water and electric deductible on Sched E or is there some limitation?
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>
water bills. For 6 months, tenant only paid two months of rent and did not pay any of the electric
or water bill. Tenant is now gone. I have to pay all of the past due electric and water bills plus
the water and electric bills for the rest of the year assuming I don't get a new tenant until January.
Are all of the expenses for water and electric deductible on Sched E or is there some limitation?
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>
JoeTaxpayer
Oct 6, 2017, 6:23:59 AM10/6/17
to
On 10/5/17 11:44 PM, njoracle wrote:
> A tenant was renting an apartment and paying rent. As part of the deal, tenant paid electric and
> water bills. For 6 months, tenant only paid two months of rent and did not pay any of the electric
> or water bill. Tenant is now gone. I have to pay all of the past due electric and water bills plus
> the water and electric bills for the rest of the year assuming I don't get a new tenant until January.
>
> Are all of the expenses for water and electric deductible on Sched E or is there some limitation?
>
Absolutely. In general, legitimate expenses for a bona fide rental
> A tenant was renting an apartment and paying rent. As part of the deal, tenant paid electric and
> water bills. For 6 months, tenant only paid two months of rent and did not pay any of the electric
> or water bill. Tenant is now gone. I have to pay all of the past due electric and water bills plus
> the water and electric bills for the rest of the year assuming I don't get a new tenant until January.
>
> Are all of the expenses for water and electric deductible on Sched E or is there some limitation?
>
property fall into two categories. Purchases that must be capitalized,
such as a new $500 fridge or $6000 roof, vs expenses that get written
off each year on Sch E, such as utilities, or normal repairs. In this
case, any utilities attributable to the apartment can be claimed.
lotax
Oct 7, 2017, 9:55:36 AM10/7/17
to
But beware the passive activity loss limitation, which may "suspend" taking a deduction for any tax losses from a rental activity until the next year.
Taxed and Spent
Oct 14, 2017, 12:35:21 AM10/14/17
to
On 10/6/2017 3:20 AM, JoeTaxpayer wrote:
> On 10/5/17 11:44 PM, njoracle wrote:
>> A tenant was renting an apartment and paying rent. As part of the deal, tenant paid electric and
>> water bills. For 6 months, tenant only paid two months of rent and did not pay any of the electric
>> or water bill. Tenant is now gone. I have to pay all of the past due electric and water bills plus
>> the water and electric bills for the rest of the year assuming I don't get a new tenant until January.
>>
>> Are all of the expenses for water and electric deductible on Sched E or is there some limitation?
>>
>
> Absolutely. In general, legitimate expenses for a bona fide rental
> property fall into two categories. Purchases that must be capitalized,
> such as a new $500 fridge or $6000 roof, vs expenses that get written
> off each year on Sch E, such as utilities, or normal repairs. In this
> case, any utilities attributable to the apartment can be claimed.
>
Roofs are expensed, not capitalized, unless there is a lot of structural
> On 10/5/17 11:44 PM, njoracle wrote:
>> A tenant was renting an apartment and paying rent. As part of the deal, tenant paid electric and
>> water bills. For 6 months, tenant only paid two months of rent and did not pay any of the electric
>> or water bill. Tenant is now gone. I have to pay all of the past due electric and water bills plus
>> the water and electric bills for the rest of the year assuming I don't get a new tenant until January.
>>
>> Are all of the expenses for water and electric deductible on Sched E or is there some limitation?
>>
>
> Absolutely. In general, legitimate expenses for a bona fide rental
> property fall into two categories. Purchases that must be capitalized,
> such as a new $500 fridge or $6000 roof, vs expenses that get written
> off each year on Sch E, such as utilities, or normal repairs. In this
> case, any utilities attributable to the apartment can be claimed.
>
work as well.
Arthur Rubin
Oct 14, 2017, 6:55:44 AM10/14/17
to
On Friday, October 13, 2017 at 9:35:21 PM UTC-7, Taxed and Spent wrote:
> Roofs are expensed, not capitalized, unless there is a lot of structural
> work as well.
>
I disagree. Certainly under the "new" capitalization rules, and probably under the old rules, roof _replacement_ is capitalized. Roof _repairs_ are, well, REPAIRS, and so are expensed.
> Roofs are expensed, not capitalized, unless there is a lot of structural
> work as well.
>
--
Arthur Rubin, AFSP, CRTP, Brea, CA
Taxed and Spent
Oct 14, 2017, 3:01:12 PM10/14/17
to
On 10/14/2017 3:52 AM, Arthur Rubin wrote:
> On Friday, October 13, 2017 at 9:35:21 PM UTC-7, Taxed and Spent wrote:
>
>> Roofs are expensed, not capitalized, unless there is a lot of structural
>> work as well.
>>
>
> I disagree. Certainly under the "new" capitalization rules, and probably under the old rules, roof _replacement_ is capitalized. Roof _repairs_ are, well, REPAIRS, and so are expensed.
>
> --
> Arthur Rubin, AFSP, CRTP, Brea, CA
>
Well, you are wrong. Under the pre-"new rules", the IRS lost several
> On Friday, October 13, 2017 at 9:35:21 PM UTC-7, Taxed and Spent wrote:
>
>> Roofs are expensed, not capitalized, unless there is a lot of structural
>> work as well.
>>
>
> I disagree. Certainly under the "new" capitalization rules, and probably under the old rules, roof _replacement_ is capitalized. Roof _repairs_ are, well, REPAIRS, and so are expensed.
>
> --
> Arthur Rubin, AFSP, CRTP, Brea, CA
>
court cases that said a roof replacement (of the "membrane", not more
extensive structural work) was a REPAIR, not an improvement, and thus
need not be capitalized.
The IRS mentioned this specifically in their comments to the new rules,
which makes sense, as the IRS cannot promulgate rules contrary to
statutory law. Interestingly, the IRS did NOT comment on the general
principal explained by the court holdings other than as applies to
roofs, so expect more litigation down the road.
But no litigation is needed with referent to roof (membrane)
replacements - they are expensable repairs.
Stuart O. Bronstein
Oct 14, 2017, 3:56:16 PM10/14/17
to
Taxed and Spent <nospam...@nonospam.com> wrote:
> Well, you are wrong. Under the pre-"new rules", the IRS lost
> several court cases that said a roof replacement (of the
> "membrane", not more extensive structural work) was a REPAIR, not
> an improvement, and thus need not be capitalized.
Can you give the regulation number of the rules or names and/or
> Well, you are wrong. Under the pre-"new rules", the IRS lost
> several court cases that said a roof replacement (of the
> "membrane", not more extensive structural work) was a REPAIR, not
> an improvement, and thus need not be capitalized.
citations for the court cases you say the IRS lost? Because what you
have stated is contrary to the IRS position in Publication 527
(2016):
https://www.irs.gov/publications/p527
> The IRS mentioned this specifically in their comments to the new
> rules, which makes sense, as the IRS cannot promulgate rules
> contrary to statutory law.
building is a capital expense, not a "repair." Under IRC §263, a
capital expense is "Any amount paid out for new buildings or for
permanent improvements or betterments made to increase the value of
any property or estate." If it's a capital improvement it is not a
deductibel repair, and has to be depreciated.
> But no litigation is needed with referent to roof (membrane)
> replacements - they are expensable repairs.
have been able to find indicates that you are incorrect.
--
Stu
http://DownToEarthLawyer.com
MTW
Oct 14, 2017, 5:46:22 PM10/14/17
to
On Saturday, October 14, 2017 at 12:56:16 PM UTC-7, Stuart O. Bronstein wrote:
> Unless you can demonstrate some legal authority, all the authority I
> have been able to find indicates that you are incorrect.
The following article mentions several cases:
> Unless you can demonstrate some legal authority, all the authority I
> have been able to find indicates that you are incorrect.
https://www.thefreelibrary.com/Expense+or+capitalize+roof+repairs%3F-a0106514723
IRS publications are, of course, NOT authoritative. And they rarely mention court cases that are contrary to the IRS's position. This messy situation regarding roof repair/improvements is an example of this.
Taxed and Spent
Oct 14, 2017, 5:51:22 PM10/14/17
to
On 10/14/2017 12:56 PM, Stuart O. Bronstein wrote:
> Taxed and Spent <nospam...@nonospam.com> wrote:
>
>> Well, you are wrong. Under the pre-"new rules", the IRS lost
>> several court cases that said a roof replacement (of the
>> "membrane", not more extensive structural work) was a REPAIR, not
>> an improvement, and thus need not be capitalized.
>
> Can you give the regulation number of the rules or names and/or
> citations for the court cases you say the IRS lost? Because what you
> have stated is contrary to the IRS position in Publication 527
> (2016):
>
> https://www.irs.gov/publications/p527
>
>> The IRS mentioned this specifically in their comments to the new
>> rules, which makes sense, as the IRS cannot promulgate rules
>> contrary to statutory law.
>
> Under statutory law something that adds to or extends the life of a
> building is a capital expense, not a "repair." Under IRC §263, a
> capital expense is "Any amount paid out for new buildings or for
> permanent improvements or betterments made to increase the value of
> any property or estate." If it's a capital improvement it is not a
> deductibel repair, and has to be depreciated.
>
>> But no litigation is needed with referent to roof (membrane)
>> replacements - they are expensable repairs.
>
> Unless you can demonstrate some legal authority, all the authority I
> have been able to find indicates that you are incorrect.
>
I have done so before right here. Replacing the roof membrane is not a
> Taxed and Spent <nospam...@nonospam.com> wrote:
>
>> Well, you are wrong. Under the pre-"new rules", the IRS lost
>> several court cases that said a roof replacement (of the
>> "membrane", not more extensive structural work) was a REPAIR, not
>> an improvement, and thus need not be capitalized.
>
> Can you give the regulation number of the rules or names and/or
> citations for the court cases you say the IRS lost? Because what you
> have stated is contrary to the IRS position in Publication 527
> (2016):
>
> https://www.irs.gov/publications/p527
>
>> The IRS mentioned this specifically in their comments to the new
>> rules, which makes sense, as the IRS cannot promulgate rules
>> contrary to statutory law.
>
> Under statutory law something that adds to or extends the life of a
> building is a capital expense, not a "repair." Under IRC §263, a
> capital expense is "Any amount paid out for new buildings or for
> permanent improvements or betterments made to increase the value of
> any property or estate." If it's a capital improvement it is not a
> deductibel repair, and has to be depreciated.
>
>> But no litigation is needed with referent to roof (membrane)
>> replacements - they are expensable repairs.
>
> Unless you can demonstrate some legal authority, all the authority I
> have been able to find indicates that you are incorrect.
>
betterment.
Alan
Oct 14, 2017, 7:51:31 PM10/14/17
to
Petitioners v. Comm'r and Oberman Manufacturing Co. v. Comm'r), in Tax
Court that allowed the "replacement" to be expensed dealt with the
intent to stop leaks.
I believe that a rental or business property owner that decides to
replace a roof because it has reached end of life and is concerned about
the future could not expense the cost.
Stuart O. Bronstein
Oct 14, 2017, 9:56:38 PM10/14/17
to
Taxed and Spent <nospam...@nonospam.com> wrote:
>>> But no litigation is needed with referent to roof (membrane)
>>> replacements - they are expensable repairs.
>>
>> Unless you can demonstrate some legal authority, all the
>> authority I have been able to find indicates that you are
>> incorrect.
>>
>
> I have done so before right here. Replacing the roof membrane is
> not a betterment.
If you are talking only about the membrane, then you're half right.
>>> But no litigation is needed with referent to roof (membrane)
>>> replacements - they are expensable repairs.
>>
>> Unless you can demonstrate some legal authority, all the
>> authority I have been able to find indicates that you are
>> incorrect.
>>
>
> I have done so before right here. Replacing the roof membrane is
> not a betterment.
The IRS position on this is,
"For example, while the replacement of a roof membrane with a
comparable new roof membrane is generally not a material betterment
of the building structure, the replacement of a roof membrane with a
new membrane made of materials designed to materially increase the
strength and efficiency of the roof should result in a betterment to
the entire building structure."
https://www.irs.gov/pub/irs-utl/tangiblepropertyatg9142016.pdf
--
Stu
http://DownToEarthLawyer.com
Taxed and Spent
Oct 18, 2017, 10:56:47 AM10/18/17
to
On 10/15/2017 10:20 PM, D. Stussy wrote:
> "Taxed and Spent" wrote in message news:ortelo$9m9$1...@dont-email.me...
>
> The court cases where the repair treatment was allowed are where the taxpayer basically paved over the old roof with a new roof.
> Cases where capital treatment was allowed where where the taxpayer removed the prior roofing materials before putting on the new
> roof.
>
That is not my recollection.
> This is per my memory from about 2006 - the last time I needed a new roof on a house. As a substantial capital component, the new
> capitalization vs. expensing rules since then haven't really changed roof treatment, but certainly can apply to other real estate
> components.....
Yes, it is interesting that the IRS focused on the word "roof" rather
than the general principals ruled upon in the court cases. This will
lead to further litigation regarding the new IRS rules. Why, for
example, is a sewer line different than a roof?
>
> What the IRS says doesn't count when the U.S. Tax Court has spoken on the matter.
>
That is not the position the IRS takes. I don't understand how the IRS
can simply decide not to follow the law whenever it feels like it.
> "Taxed and Spent" wrote in message news:ortelo$9m9$1...@dont-email.me...
> On 10/14/2017 3:52 AM, Arthur Rubin wrote:
>> On Friday, October 13, 2017 at 9:35:21 PM UTC-7, Taxed and Spent wrote:
>>> Roofs are expensed, not capitalized, unless there is a lot of structural
>>> work as well.
>>
>> I disagree. Certainly under the "new" capitalization rules, and probably under the old rules, roof _replacement_ is capitalized.
>> Roof _repairs_ are, well, REPAIRS, and so are expensed.
>
>> On Friday, October 13, 2017 at 9:35:21 PM UTC-7, Taxed and Spent wrote:
>>> Roofs are expensed, not capitalized, unless there is a lot of structural
>>> work as well.
>>
>> I disagree. Certainly under the "new" capitalization rules, and probably under the old rules, roof _replacement_ is capitalized.
>> Roof _repairs_ are, well, REPAIRS, and so are expensed.
>
> Well, you are wrong. Under the pre-"new rules", the IRS lost several
> court cases that said a roof replacement (of the "membrane", not more
> extensive structural work) was a REPAIR, not an improvement, and thus
> need not be capitalized.
>
> The IRS mentioned this specifically in their comments to the new rules,
> which makes sense, as the IRS cannot promulgate rules contrary to
> statutory law. Interestingly, the IRS did NOT comment on the general
> principal explained by the court holdings other than as applies to
> roofs, so expect more litigation down the road.
>
> But no litigation is needed with referent to roof (membrane)
> replacements - they are expensable repairs.
> =============
> court cases that said a roof replacement (of the "membrane", not more
> extensive structural work) was a REPAIR, not an improvement, and thus
> need not be capitalized.
>
> The IRS mentioned this specifically in their comments to the new rules,
> which makes sense, as the IRS cannot promulgate rules contrary to
> statutory law. Interestingly, the IRS did NOT comment on the general
> principal explained by the court holdings other than as applies to
> roofs, so expect more litigation down the road.
>
> But no litigation is needed with referent to roof (membrane)
> replacements - they are expensable repairs.
>
> The court cases where the repair treatment was allowed are where the taxpayer basically paved over the old roof with a new roof.
> Cases where capital treatment was allowed where where the taxpayer removed the prior roofing materials before putting on the new
> roof.
>
That is not my recollection.
> This is per my memory from about 2006 - the last time I needed a new roof on a house. As a substantial capital component, the new
> capitalization vs. expensing rules since then haven't really changed roof treatment, but certainly can apply to other real estate
> components.....
Yes, it is interesting that the IRS focused on the word "roof" rather
than the general principals ruled upon in the court cases. This will
lead to further litigation regarding the new IRS rules. Why, for
example, is a sewer line different than a roof?
>
> What the IRS says doesn't count when the U.S. Tax Court has spoken on the matter.
>
That is not the position the IRS takes. I don't understand how the IRS
can simply decide not to follow the law whenever it feels like it.
Stuart O. Bronstein
Oct 18, 2017, 12:11:52 PM10/18/17
to
>> What the IRS says doesn't count when the U.S. Tax Court has
>> spoken on the matter.
>
> That is not the position the IRS takes. I don't understand how
> the IRS can simply decide not to follow the law whenever it feels
> like it.
The IRS doesn't just ignore court decisions. Every tax court case
>> spoken on the matter.
>
> That is not the position the IRS takes. I don't understand how
> the IRS can simply decide not to follow the law whenever it feels
> like it.
arises from one of the 13 federal court districts. If the IRS
disagrees with a case, they may appeal. But if they don't, they may
decide to "nonacquiesce." In that case they will follow the court
decision in that federal district, but not others, until ordered to do
so. Once they lose in two or more federal districts, they will
generally change their mind, but sometimes it takes going to the
Supreme Court before they will follow a decision everywhere.
--
Stu
http://DownToEarthLawyer.com
0 new messages