"Paul Thomas, CPA" <paulthomascp...[at]bellsouth.net> wrote:
- quote -

I appreciate all the answers. It is true that the insurance
company will cancel if this work is not done. The first
thing done was to replace the PG&E line from the street to
the building. 15 amp fuse boxes are being replaced by
circuit breakers and wiring to the kitchens (but not the
rest of the apartments) is being replaced. There will be a
circuit breaker box outside each unit as wellas a main one.
Work on tge main breaker room benind one of the stores was
held up until the heritage people approved the door! Noone
is vacating while the work is being done.

Thanks again for all the opinions.
~ Barbara

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"Barbara" <bvsea[at]value.net> wrote:

- quote -

What I am about to write is 'completely off-the-wall" and
unless you can find a Circular 230 tax profesional to look
it up and sign off on it, don't use it.

This is an involuntary upgrade of an existing building
system that has not failed. If there is an ordinance that
requires you to have fire insurance in order to rent the
building, then the property is not rentable without the
upgrade. Thus, this may be ~similar~ to the expensing of
a new roof by the Tax Court. Some professionals think the
Tax Court got that one wrong, but I have not read anything
about the IRS appealing that decision.

If the above is not delusionery, it might be worth
capitalizing, filing your return, and then filing an amended
return where you expense.

Keep in mind I do not prepare tax returns, not even my own.

Dick

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L K Williams <lanny[at]loxinfo.co.th> wrote:
- quote -

Can "is up to code" be considered a "condition that existed
before"? The wiring *was* up to code in 1946.

Seth

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Barbara" <bvsea[at]value.net> wrote:

- quote -

This sounds like an improvement and should be capitalized.
Remember, the basic rule is that you capitalize anything
which adds to the value or extends the life of the asset.
Expenses are things which merely restore the value or life
to a condition that existed before.

In this case, you are both adding to the value (a buyer
would obviously pay more for a building with wiring up to
standard) and extending the life. You are not restoring
value or life because they did not previously exist.

You will have to wait until the project is complete before
starting depreciation. That's when, officially, you put the
new wiring in service.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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"L K Williams" <lanny[at]loxinfo.co.th> wrote
- quote -

I agree it gets capitalized and depreciated, but it seems
that it's being "placed in service" as the work progresses.
So it's possible (but messy) to start depreciation as
payments are made on most if not all of the work.

My thoughts would be totally different if the building were
unoccupied.

--
Paul Thomas, CPA
paulthomascpapc[at]bellsouth.net

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"Barbara" <bvsea[at]value.net> wrote:

- quote -

This sounds like an improvement and should be capitalized.
Remember, the basic rule is that you capitalize anything
which adds to the value or extends the life of the asset.
Expenses are things which merely restore the value or life
to a condition that existed before.

In this case, you are both adding to the value (a buyer
would obviously pay more for a building with wiring up to
standard) and extending the life. You are not restoring
value or life because they did not previously exist.

You will have to wait until the project is complete before
starting depreciation. That's when, officially, you put
the new wiring in service.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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I have read through the recent thread regarding roofs and am
still musing about my situation. I am dealing with a
building built in 1902 that houses commercial spaces on the
ground floor and apartments on the two upper floors.
Electrical was upgraded to 110 in 1945. Everything has been
in working order but the insurance company has demanded that
the electrical now be brought up to current code at least as
far as the kitchens. About half of the work was done in
2006 & progress payments of $48,000+ ([at] another $30,000 to
go) were made. I was planning to capitalize until I saw
the discussion here & am wondering if there is any
justification for expensing this work.

Also, if capitalizing is the answer, is it possible to
depreciate each progress payment? The contractors are
working during the day, inconveniencing the business as
little as possible and the apartments are all in working
order each evening, As each part is completed a progress
payment is made. Obviously, we would like to expense as
much as possible in 2006. The building is the only asset in
a bypass trust and there really isn't any cashflow during
this project to give the beneficiaries their income this
year (they agree) so there will be tax at the trust level
which will be less than the beneficiaries would be getting.

Next project is to retrofit the facade for earthquakes as
being demanded by the city . . .

Thanks for any input on this!
~ Barbara

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