All Forum Posts by: Aaron Heun

@Nicholas Aiola

Im running into an issue on my 2018 taxes and hoping you can help me.  I purchased a new furnace and Air conditioner for my only rental property in July 2018 at a cost of 6875.  Without factoring in the new furnace/ac, I have gains of 6296 on schedule E.  The unadjusted basis is below 250k, so I wouldnt be eligible for a small taxpayer safe harbor election.  However, I would like to be able to expense at least a portion of the Furnace/AC.  

Turbo tax suggests that I can use either section 179 and/or 100% Special Depreciation Allowance to do so or a combination of both.  This and my subsequent research has lead me to the following questions:

1) I believe a furnace and AC constitute structural components of a building, and read that this excludes them from Section 179.  Is this accurate?

2) Is Bonus Depreciation and Special Depreciation Allowance the same thing?

3) Assuming the above are the same, I read that bonus depreciation cannot be applied to anything with a depreciation term beyond 15 years.  Does this mean the furnace and AC don't qualify with a 27.5 year term?

4) Do you have advice on expensing/depreciating the furnace and A/C quicker than 27.5 years that I may be overlooking.

5) I also did not file 1099s as Ive seen guidance suggesting small landowners need not do so.  Would the need to be a "business" in order to take the Section 179 deduction (if possible) conflict with my lack of filing 1099s?

Thanks in advance for any help you can provide and for all the insight on this thread.

Bumping this thread up from the depths.  Ive got a bunch of these Aspen shooters at my primary residence in Broomfield.  Wondering what all you other Denverites determined was the best strategy for dealing with this?  Just keep cutting em?  Weed b Gone? Sucker Stopper RTU?  Any advice is appreciated.

Ive done some research and spoke to an accountant but Im curious if anyone here has advice on this topic. We (my wife and I) converted a primary residence to a rental property and it has appreciated considerably. We also have a very low fixed rate mortgage from 2012. We are currently depreciating off of our adjusted basis but would like to be able to step up our basis to FMV before our 2 in 5 years rule expires. We want to do this both for depreciation purposes and to reduce future capital gains if we were to sell. Our accountant says that we can sell the property to a newly formed LLC to do so, based on letter ruling 8350084 (which is discussed and debated in a number of BP posts). However the upside of the depreciation appears to be offset by the current interest rates available if we were to refinance in the name of the LLC. Our mortgagee seems open to transferring the mortgage to the LLC as long as we personally guarantee it. But we can't just transfer the property to a partnership as that would pass on its current tax basis. We have to "sell" the property. So the question is... is there a way to sell the property to the LLC with the mortgage that would constitute a sale to the LLC as opposed to a contribution of property to the LLC.

There are a number of tax articles about how to have "tax-free" transactions with your own partnership, but I cant find any that address the opposite.  We want to incur the gain as it would be tax free under section 121.  Is the difference in the type of deed recorded?  Anyone have experience with this?

Going further on dishwasher and disposal discussion.  I think that would make sense for a lot of rentals, like ones I previously lived in.  However this is in a 95% owner occupied neighborhood and is in very good shape.  My experience aside, the target tenant is someone who can take care of a disposal and a dishwasher.  

@Mindy Jensen

Youve got me somewhat concerned since we're both in Colorado.  However, this looks pretty clear to me

https://codes.findlaw.com/co/title-13-courts-and-c...

See Item 4, which applies as the lease has no extention option and states "no notice required."

@Ned J.

Fortunately my deposit is 4400.  And I just got last month of rent.  I really appreciate the point going forward as its something I have definitely overlooked.  I think Ive got enough cushion in this case though, knock on wood.  We'll see if thats still the case after he finds out he cant renew.

@Ned J.  He paid for a dehumidifier rental and some immediate costs with the first flood.  However neither of us wanted to gut the kitchen while he lived there so the repairs have not been made yet.  I figured I would make the repairs and pay out of security deposit after he left.  I also didnt want to treat the issue as resolved, and then find that the damage was worse than previously thought.  You make a very good point though for me to think about in leases going forward.

@Mike McCarthy Good point.  I guess while I have my own reasons for not renewing, I don't have to communicate my frustration in the conversation.  There are plenty of reasons we wouldnt be renewing.

@Michael Hartman I guess thats a possibility but only solves one of the negligence related issues.  My impression is that usually people dont make the same mistakes twice, and that I can't guess what the next negligence related issue is going to be.  I feel like trying to mitigate future problems is going to be like playing whack-a-mole.  I got a higher end freeze-proof faucet that has an internal drain mechanism to relieve pressure if a hose is left connected, but I would bet he isnt going to leave a hose connected in the winter again. 

I appreciate the advice from all of you and will definitely not offer another lease, but won't tell the tenant that until Ive received the final month of rent.

What suggestions do you have to help protect the property in the final month of the lease when he knows he's being kicked out.  

I appreciate the input, I think we've become the frog in cold water that gets brought to a boil.  You guys are helping point out how hot the water is.

The house has appreciated a lot, we have great cash flow and we took a large enough security deposit to cover everything damaged to date. I will wait to get June's rent before notifying him which will mean we received 100% of rent.  The issue will be if future damage offsets more than the remaining security deposit.