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Old 04-03-2013, 12:55 PM
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Cost Basis and Segmented depreciation

I bought a rental property on 2011. I used segment depreciation. Land $50,000 +dwelling $175000+ list of personal property $5000. Total $230,000
In particular the washer was value at $200 that I depreciated on 2011. On 2012 the washer broke down. I am reporting loss of the depreciation left as ordinary loss. Is this correct ? And what happen to my cost basis if I don't replace the washer?.
Also, I replaced the carpet on 2012 for ceramic tile. The carpet had a cost basis of $1200 on 2011 and it was depreciated. I claimed as ordinary loss the depreciation left on the carpet. Should I removed the carpet from cost basis since I listed ceramic tile now with cost basis of $1800



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Old 04-05-2013, 11:34 PM
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“I bought a rental property on 2011. I used segment depreciation. Land $50,000 +dwelling $175000+ list of personal property $5000. Total $230,000”============= You cannot depreciate the cost of land because land does not wear out, become obsolete, or get used up. The cost of land generally includes the cost of clearing, grading, planting, and landscaping. Although you cannot depreciate land, you can depreciate certain land preparation costs, such as landscaping costs, incurred in preparing land for business use. These costs must be so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property
“In particular the washer was value at $200 that I depreciated on 2011. On 2012 the washer broke down. I am reporting loss of the depreciation left as ordinary loss. Is this correct ? “==========Ordinary loss sec 1231 loss is treated as ordinary loss, NOT capital loss. As said, capital improvements are added to the basis of the real pty to be depreciated for 27. 5 years instead of being written off. Although residential property depreciates on a 27.5-year schedule, personal property and certain items purchased for rental use such as appliances depreciate on a much shorter lifespan. For appliances purchased after 1987, the IRS allows landlords to claim deductions over a five-year depreciation schedule using its Modified Accelerated Cost Recovery System, which allows landlords to deduct a percentage of the cost of the appliance each year for five years.

“And what happen to my cost basis if I don't replace the washer?.”=========You need to reduce the basis by the amount of the ordinary loss.there is no change in the basis of the rental pty as the washer cost is not added to the rental pty basis.
“Also, I replaced the carpet on 2012 for ceramic tile. The carpet had a cost basis of $1200 on 2011 and it was depreciated. I claimed as ordinary loss the depreciation left on the carpet. Should I removed the carpet from cost basis since I listed ceramic tile now with cost basis of $1800”============ Repairs and Improvements are treated differently when dealing with Rental Property Repairs are deductible while Improvements are depreciated over 5~27.5 years(possibly) for carpet. Replacing carpet and vinyl in an classified as an improvement and not as maintenance like painting, cleaning service, repairs, etc.it is also sec1231 ordinary loss; you need to reduce basis of the rental pty by that amount.



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