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Author: Nathar Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121482  
Subject: Deductibility of Tools for Renovation Date: 3/5/2001 8:56 AM
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If we purchase tools for the purpose of renovating a rental property, can that purchase price be added to our basis? The tools of course wouldn't be consumed, and we'd still have them for use on our own home if we so desired.
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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47681 of 121482
Subject: Re: Deductibility of Tools for Renovation Date: 3/5/2001 8:59 AM
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If we purchase tools for the purpose of renovating a rental property, can that purchase price be added to our basis? The tools of course wouldn't be consumed, and we'd still have them for use on our own home if we so desired.

Others may disagree, but I think this is too agressive. I wouldn't take depreciation for the tools.

Phil Marti
VITA Volunteer

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Author: TheBadger Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47683 of 121482
Subject: Re: Deductibility of Tools for Renovation Date: 3/5/2001 9:08 AM
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If we purchase tools for the purpose of renovating a rental property, can that purchase price be added to our basis? The tools of course wouldn't be consumed, and we'd still have them for use on our own home if we so desired.

Others may disagree, but I think this is too agressive. I wouldn't take depreciation for the tools.


99.9% of the time I agree with pmarti. The exception is when you purchase some tools that are very expensive; e.g. an industrial shaper or a complete pneumatic system with nailers which you specifically use for the renovation & then sell at the conclusion of the project. Then I would add the depreciation / capital loss on those tools to the basis of the proerty.

Normal stuff like portable electric / cordless tools used on the project & then added to your personal collection of tools should not be added to the basis of the project.

TheBadger



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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47691 of 121482
Subject: Re: Deductibility of Tools for Renovation Date: 3/5/2001 10:38 AM
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nathar:

If we purchase tools for the purpose of renovating a rental property, can that purchase price be added to our basis? The tools of course wouldn't be consumed, and we'd still have them for use on our own home if we so desired.

pmarti:

Others may disagree, but I think this is too agressive. I wouldn't take depreciation for the tools.

me:

The cost of tools would never be added to the basis of a rental property. Your choices conceivably would be to take as an expense or to capitalize separately and depreciate as a separate asset associated with the rental property. If you choose the latter route, you would have to determine what percentage of their use was attributible to the rental property and what percentage was "personal" use.

Ira

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Author: EGUSC Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47706 of 121482
Subject: Re: Deductibility of Tools for Renovation Date: 3/5/2001 1:35 PM
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I maybe aggressive, but i would depreciate any tool purchased directly for its initial use on a rental property. Any subsequent use is de minimis, in my opinion as long as the equipment was truly purchased for work on the rental unit. What do you have to lose. I do not think that there are many IRS auditors that would want to take the case to appeals if you purchased a tool with a receipt dated during a period that included other receipts for repair work for a rental unit. My experience is that over 90% of IRS auditors will agree to allow a deduction as long as you have any reasonable argument.

If you purchase a tool for less than $100 dollars i would expense it. Every business has a threshold for capitalizing assets and i have never had an IRS agent adjust for an item under $500.

But if you buy a $700 drill press during a period with no other work is done to the rental, you will lose the entire deduction for sure.

I know phil hates to hear about what would happen in an audit but i think that is the bottom line

I can think of no reason to capitalize tools for a schedule E rental, there might be something under self constucted assets.

Good luck

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Author: Nathar Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47719 of 121482
Subject: Re: Deductibility of Tools for Renovation Date: 3/5/2001 3:41 PM
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I maybe aggressive, but i would depreciate any tool purchased directly for its initial use on a rental property. Any subsequent use is de minimis, in my opinion as long as the equipment was truly purchased for work on the rental unit. What do you have to lose. I do not think that there are many IRS auditors that would want to take the case to appeals if you purchased a tool with a receipt dated during a period that included other receipts for repair work for a rental unit. My experience is that over 90% of IRS auditors will agree to allow a deduction as long as you have any reasonable argument.

If you purchase a tool for less than $100 dollars i would expense it. Every business has a threshold for capitalizing assets and i have never had an IRS agent adjust for an item under $500.

But if you buy a $700 drill press during a period with no other work is done to the rental, you will lose the entire deduction for sure.

I know phil hates to hear about what would happen in an audit but i think that is the bottom line

I can think of no reason to capitalize tools for a schedule E rental, there might be something under self constucted assets.

Good luck


So, if I understand you correctly:

If I own a rental property and I need ladders and paintbrushes in order to do ordinary maintenance (I think painting is considered ordinary maintenance) it's okay to deduct the cost of ladders, paintbrushes, etc. from my rental income?

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Author: EGUSC Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47746 of 121482
Subject: Re: Deductibility of Tools for Renovation Date: 3/5/2001 5:29 PM
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If it was my return, i would deduct the ladder. I can see no problems with the paint brush. But the ladder might be an issue if you are audited. The fact and circumstance of the case will determine if you get a deduction. If the rental has low ceiling and does not really need a ladder, you might lose. If you need a very tall ladder for very high ceiling, it looks better. I have not experience an IRS agent adjusting an item like a $50 ladder that was expensed and instead depreciate it. I bet some auditor has, but not to many.




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Author: BigBunkler Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47747 of 121482
Subject: Re: Deductibility of Tools for Renovation Date: 3/5/2001 5:36 PM
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If the rental has low ceiling and does not really need a ladder, you might lose. If you need a very tall ladder for very high ceiling, it looks better. I have not experience an IRS agent adjusting an item like a $50 ladder that was expensed and instead depreciate it.
=== === ===

Pragmatically, why not just put the $50 cost of the ladder under supplies as a (reasonable) expense?
--BigBunk

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