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Exterior Painting of a Rental House

 
 
Lisa
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      09-18-2003, 04:26 AM
I am having the outside of a rental house we own painted.
It will be approximately $2,000. Can this be deducted as an
expense or does it need to be depreciated and, if so, over
how many years?

Thank you in advance for any information.

=====================================
Moderator: If only it were a roof <g>
=====================================

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Herb Smith
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      09-23-2003, 03:05 AM
"Lisa" <> wrote:

> I am having the outside of a rental house we own painted.
> It will be approximately $2,000. Can this be deducted as an
> expense or does it need to be depreciated and, if so, over
> how many years?
>
> Thank you in advance for any information.
>
> =====================================
> Moderator: If only it were a roof <g>
> =====================================


Repainting is a maintenance expense and is deductible in the
year incurred. It is not a capital improvement to be
depreciated.

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Paul A. Thomas
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      09-23-2003, 03:05 AM
"Lisa" <> wrote

> I am having the outside of a rental house we
> own painted. It will be approximately $2,000.
> Can this be deducted as an expense or does
> it need to be depreciated and, if so, over
> how many years?


I'd expense it as a maintenance expense. Painting is
something you probably will do on a regular basis, and it
doesn't significantly extend the life of the structure.

--
Paul A. Thomas, CPA


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Ed Zollars, CPA
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      09-23-2003, 03:05 AM
Lisa wrote:

> I am having the outside of a rental house we own painted....
>
> =====================================
> Moderator: If only it were a roof <g>
> =====================================


Actually, the roof analysis *does* apply here--the issue
again comes down to does the painting do one of two things:

1. Materially add to the useful life of the house *OR*

2. Materially add to the value of the house

Noting that the courts have held that in neither case does
the expenditure trip those tests merely because a house left
in disrepair would be worth less than one that is
maintained.

As well, there is a subsidiary question that we likely can
dismiss--what is the asset? Do we analyze the house as the
principal asset and the painting as merely part of it
(almost certainly the way this one is going to go <grin>) or
is the "repaired part" the asset in question. In the recent
Federal Express district court case that *was* the key issue
when looking at aircraft engines, since the question of
whether the engine or the aircraft was the asset was key.
However, as I note, I doubt that even the most rabidly
pro-government IRS agent would seriously argue the paint is
a truly separate asset from the building. So we are back to
the standard two pronged test applied to the building.

In the vast majority of cases I would say the answer is
going to be this would be a repair/maintenance and currently
expensed. However, there could be facts that would change
that.

First key one--the painting was necessary to get the
building into shape to be put in service. That is, you
bought a house that was in desperate need of painting before
anyone would consider leasing it from you. In that case,
it's part of the cost of the house and depreciated over the
MACRS life of the building.

Second fact pattern that might apply that's similar in many
ways--you had a commercial building that had a paint job
that clearly indicated a particular tenant's business (say
it previously held a fast food restaurant with a particular
decor). It might be argued if you repainted that building
to remove the signs of its prior tenant, that did increase
the value of the rental building. Similarly, if you painted
the building in that color scheme to bring in that
particular tenant, I think there's an argument that an asset
was created.

But, in this case, absent some real strange facts, I expect
expensing to be justified. That doesn't mean an agent
wouldn't *try* to include it as part of the building <grin>,
but just that I don't think if push came to shove that the
Tax Court would require it to be depreciated.

--
Ed Zollars, CPA
Phoenix, Arizona

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Harlan Lunsford
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      09-23-2003, 03:24 AM
Lisa wrote:

> I am having the outside of a rental house we own painted.
> It will be approximately $2,000. Can this be deducted as an
> expense or does it need to be depreciated and, if so, over
> how many years?
>
> Thank you in advance for any information.
>
> =====================================
> Moderator: If only it were a roof <g>
> =====================================


I got the impression he was talking about painting the roof.

C$,
HL

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Mike Lewis
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      09-23-2003, 04:02 AM
"Lisa" <> wrote:

> I am having the outside of a rental house we own painted.
> It will be approximately $2,000. Can this be deducted as an
> expense or does it need to be depreciated and, if so, over
> how many years?


I would expense it. You may get other opinions on this, but
to me painting is maintenance.

Mike Lewis, CPA

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Drewremedy
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      09-23-2003, 04:41 AM
> I am having the outside of a rental house we own painted.
> It will be approximately $2,000. Can this be deducted as an
> expense or does it need to be depreciated and, if so, over
> how many years?


Seems to me like routine maintenance which is an expense.

However if you comingle capital improvements with routine
repairs you could gettuck to capitalize the whole bunch.
Ask your tax advisor before you enter major improvements
area!

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William P. Brown
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      09-23-2003, 04:41 AM
Lisa wrote:

> I am having the outside of a rental house we own painted.
> It will be approximately $2,000. Can this be deducted as an
> expense or does it need to be depreciated and, if so, over
> how many years?



Expense it on Schedule E.

Regards,
Bill
~~~~
Associate Professor of Accounting
Longwood University
Department of Accounting, Economics & Finance
http://www.longwood.edu/staff/wpbrown/
Opinions expressed by me are mine, not my employer's.

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