Exterior Painting of a Rental House

Discussion in 'Tax' started by Lisa, Sep 18, 2003.

  1. Lisa

    Lisa Guest

    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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    Lisa, Sep 18, 2003
    #1
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  2. Lisa

    Herb Smith Guest

    "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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    Herb Smith, Sep 23, 2003
    #2
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  3. "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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    Paul A. Thomas, Sep 23, 2003
    #3
  4. 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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    Ed Zollars, CPA, Sep 23, 2003
    #4
  5. 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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    Harlan Lunsford, Sep 23, 2003
    #5
  6. Lisa

    Mike Lewis Guest

    "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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    Mike Lewis, Sep 23, 2003
    #6
  7. Lisa

    Drewremedy Guest

    > 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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    Drewremedy, Sep 23, 2003
    #7
  8. 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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    William P. Brown, Sep 23, 2003
    #8
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