Arthur L. Rubin wrote:
- quote -

Based on your responses so far (which are much appreciated),
perhaps my thinking is all wrong about how to treat these
expenses.

There's no way the IRS will agree that a new washing machine
is a "repair". It must be depreciated, as too, I would
expect, the thousands paid for a remodeled bathroom.

Perhaps it's safest to just pass on the special
depreciation, then.

PM

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Nan Eklund wrote:

- quote -

It's not a CAPITAL loss. (The IRS has a similar carryfoward
schedule and worksheets. The California worksheets are more
complicated because the California figures have to be calculated
using California adjustments, the same "logic" as the Federal
schedules performed, and then it has be changed back to an
adjustment.)

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- quote -

Could be. I'm just not sure how "remodeling" fits
in the "new" vs. "used" category, or how parts
(probably 5 years, rather than 7) vs. labor
("repairs", and immediately deductable?) would be
handled.

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California allowes a carry forward of passive rental losses.
In fact, they have a forest of worksheets for showing the
losses.

Nan, EA in LA

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Arthur L. Rubin wrote:
- quote -

You don't reckon he's trying to depreciate the bathroom
remodeling over seven years, do you?

Cheer$,
Harlan Lunsford

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Paul wrote:

- quote -

Turbo Tax may be wrong -- at least as far as the bathroom
is concerned....

- quote -

It seems to me that you need to run the numbers both ways
with various scenarios to see what the effects would be.
If, for example there would be no California adjustments
related to the rental if you elected to waive the special
depreciation, that should also be taken into account. If
you don't use Turbo Tax for the rest of the life of
the rental, you may have trouble importing the carryovers
into the new tax program, and simplicity may be important.

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Paul wrote:

(Referring to California and Minnesota.)

- quote -

I'm not sure what you mean by this. "Passive
capital losses"?

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Last year, I spent many thousands of dollars repairing (er,
improving) a rental property that I've owned since the
mid-1980s. Some of the expenses include new kitchen
appliances and a remodeled bathroom.

Turbo Tax informs me that these items qualify for a special
50% first-year depreciation. That would be great, except it
does me no good: Given my income, other rental expenses, and
lower rents, the rental property is decidedly in the red
this year (2003), even without the special 50% depreciation,
and only a small fraction is deductible.

My question is: Should I take the 50% depreciation this year
anyway, even though it will produce no immediate benefit,
other than increasing the amount of passive loss carried
into next year? Or, would it be better for me to decline the
special depreciation, thereby "saving" more depreciation for
subsequent years AND given that California and Minnesota
seem to disallow the special depreciation from state-tax
calculations. (But then they don't seem to like
carried-forward passive captial losses either).

Thank you in advance.

PM

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