What to do when you fail the de minimis safe harbor election test

[Craig Poskus]

Good morning everyone!

I think I have a unique situation in that I do not qualify for the de minimis safe harbor election test.  Now the cost of each of my items is below $2,500, however I don't believe I meet the other rules to take the election.

• Your gross receipts, including all your other income, are $10,000,000 or less. 

I do meet this one!

• Your eligible building has an unadjusted basis of $1,000,000 or less.

I meet this one as well!

• The cost of all repairs, maintenance and improvements is less than or equal to the smallest of these limits:
  • 2% of the unadjusted basis of your building or
  • $10,000

I do not believe I meet this one.  My total for repairs, maintenance and improvements comes to well over $11,000...it wasn't a great year for us.  It's also well over my unadjusted basis so that is moot.

1) My question is can I now not take the safe harbor election for any of these items and must I depreciate everything over 27.5 years?

2) Or can I take it for just up to the $10,000 limit and depreciate the rest?  

3) Or do I expense the maintenance and repairs, which are roughly $6,000 and depreciate the $5,000 in improvements?

Please let me know if I missed any details or can provide anything else to help me solve this problem.

Thanks!

Craig