Expense or Capitalize .. this is a question ...

[LEONID ORLOV]

Hi fellow RE investors,
I am trying to finish my taxes for 2011 .. The same question that hunts me every year raised its ugly head once again.

Issue #1:

I have two times of expenses, routine maintenance that sometimes is quite costly .. like labor and materials to repair main sewer .. or upgrading the unit after its vacated.

Second category is rehabbing trashed new acquisition.

IRS rule is relatively simple: If the item has short life span .. like a gasket or so .. labor and materials can be expensed in the same year. But, if the item of the lasting lifespan, one need to capitalize it and expense over the item lifespan.

Thus, if one replaced a faucet (lifespan is 5 years or so) .. than I need to capitalize the repair labor and material over 5 years?

If one reads IRS rules literally, than almost nothing can be expensed and have to be capitalized.

Let me ask you, possibly rhetorical question, Am I crazy, interpreting the rules that way?

Issue #2

I have 1.2 a dozen rental properties, do I report all income and all expenses on schedule E? or should I have a RE Management business with its Schedule C, were all or partial income and schlepping around expenses can be shown?

I am asking because I have a leased car, that I primarily use for RE business and I want to deduct lease pmts as well as other actual expenses, instead of taking mileage based deductions.

I apologize, if these questions already were answered at some other forum and I repeat the question.
Please refer me to such forum, if this is the case.

Thanks for your help.
Leonid

[Jeff S.]

Find a good CPA. Ask for referrals from experienced RE people. By using an accountant's services you will learn all the ins and outs of tax write-off etc. It doesn't cost that much. Good luck.