(standard disclaimer : I searched the forum on some keywords before posting this, hope this hasnât been discussed before )Hi folks, love the depth of knowledge on this forum.Normally with a SFR if you do things by the book, an expense for say replacing windows would be considered a capital improvement that would not all be expensed in a given year, rather it would be depreciated over some years. Â Similar for appliances.With the park-owned homes, I truly think this model doesnât apply. Â A POH comes back to you, they stole the appliances, busted the windows, etc. Â It would seem that things that are cap improvements in higher grade housing are simple repairs in the MHP biz. Â Additionally, itâs would be quite a bit of work to keep track of these items for every home in the park, depreciate the remaining amount of a fridge when it gets stolen, a countertop when it gets ruined, etc.How are people actually playing this one when it comes to their tax returns?Thanks in advance, cheers,Tim
We actually track all that stuff and do in fact capitalize it. Â Thatâs the law. Â Even a 1955 8x20 flat-roof mobile home that only has 5 years of useful life in it needs to be capitalized over the next 27.5 years. Â That said, as soon as the appliance, home, or other capitalized item is stolen, replaced, taken to the dump, or otherwise no longer in service, you can expense all the remaining amount of it off your balance sheet if itâs not already fully depreciated.For instance, when we rehab a home, we always tell our accountant to expense any improvements to the home that are still on the books because we are almost certainly replacing them as part of the new rehab (paint, flooring, etc.). Â It is rare that we have to rehab a home within 5 years of a previous rehab (thatâs the life of flooring materials, for example), but we do always have our accountant check and expense anything for that house that may still be on the books.One final thought: donât be in the appliance business. Â Tenants should be getting the appliances they want for themselves. Â About 1/3 of your appliances will be stolen on every turnover anyway. Â Focus on providing a clean, safe âboxâ - the four walls roof, and floor. Â We donât provide window treatments either - they get damaged/stolen equally frequently as the appliances.My 2 cents worth,-jl-
Hey Jefferson, your thoughts are always quite useful and appreciated. Â Yeah, we did in fact decide to stop providing the appliances. Iâll have to think about blinds and what not. Â Cheers!
HighPlainsDrifter, thank you for your post concerning âRepairsâ (single year deduction) vs âCapital Improvementsâ (multi-year deductions) for Tax Purposes.I am in the midst of creating Excel Spreadsheets for our Accountant for taxes.I had placed all the âMobile Homeâ Expenses under âCapital Improvementsâ for the Mobile Homes (Thus, depreciated over multiple years).  However, our Accountant (who owns Apartment Buildings) said that we could move some of our âMobile Homeâ âCapital Improvementsâ over to âRepairsâ.Below is some information from the IRSâs Website concerning âCapital Improvementsâ vs âRepairsâ:http://www.irs.gov/Businesses/Capitalization-v-Repairs-Audit-Technique-Guide#14CapitalRepairImprovements that âputâ property in a better operating conditionImprovements that âkeepâ property in efficient operating conditionRestores the property to a âlike newâ conditionRestores the property to its previous conditionAddition of new or replacement components or material sub-components to propertyProtects the underlying property through routine maintenanceAddition of upgrades or modifications to propertyIncidental Repair to propertyEnhances the value of the property in the nature of a betterment Extends the useful life of the property  Improves the efficiency of the property  Improves the quality of the property  Increases the strength of the property  Increases the capacity of the property  Ameliorates a material condition or defect  Adapts the property to a new use  Plan of Rehabilitation Doctrine  From the IRS Chart above replacing a Broken, Leaking Bathroom Tub could effectively be classified as both:-  Repair:  Improvements that âkeepâ property in efficient operating condition/OR/-  Capital Improvement: Restores the property to a âlike newâ conditionJefferson said that he places all his Mobile Home repairs under âCapital Improvementsâ to have multiple year deductions (capitalized over multiple years).How do others treat Mobile Home expenses? Thank you for your comments!