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Old 11-04-2013, 03:47 PM
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Deprecation Question

I have a rental property with an in ground swimming pool. Earlier this year I replace the liner in the pool. Under normal circumstances I know I’d need to depreciate the cost of the liner over several years (Liners have a life span of 5-10 years, but I haven’t looked up how long I’d need to depreciate it over). Recently I've learned the pool has some structural issues that have compromised the liner and will result in the pool having to be removed as it will be more costly to repair that it’s worth. My question is what to do with the cost of the liner? Do I continue to depreciate it over the set number of years even though it won’t exist anymore, or is there some way to claim more of the cost up front? Also, how would I treat the cost of having the pool removed and filled in?



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Old 11-05-2013, 05:08 AM
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Originally Posted by m9s999 View Post
#1; Recently I've learned the pool has some structural issues that have compromised the liner and will result in the pool having to be removed as it will be more costly to repair that it’s worth. My question is what to do with the cost of the liner?



#2;Do I continue to depreciate it over the set number of years even though it won’t exist anymore, or is there some way to claim more of the cost up front?



#3;Also, how would I treat the cost of having the pool removed and filled in?
#1;You can write off" an asset, the liner, when it determines that asset to be worthless/useless and removes the asset from your balance sheet completely. That's a write-off. When the asset quits working, there is no further expense needed. All you do is remove the asset and its accumulated depreciation from the balance sheet. As long as the book value(original cost minus accumulated depre.) I mean, the carrying value , is already zero, there's no effect on your net worth.However, when you dispose of the rental pty, you must recapture the unrecaptured depreciation on the pool and liner as reg income taxed at 25%, under Sec 1245 pty rule.



#2;As mentioned above. No; UNLESS the liner exists, you can never depreciate it.

#3; You may deduct/write off the cost of having it removed or any expenses you incur in providing these services at your rental property.
However, when you dispose of the rental pty, you must recapture the unrecaptured depreciation on the pool and liner as reg income taxed at 25%, under Sec 1245 pty rule.



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