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In an earlier post, one of our members stated that he/she would take the furnace replacement as a "repair" "in light of the recent tax court opinion regarding roof replacement."

Would you go into more detail regarding this decision?

I started depreciation of my central heat/AC replacement purchased in January, 2004, for my rental home in FL.


See, for example, TC Summary Opinion 2002-117. Taxpayer put a new roof on a rental property and deducted it in full as an ordinary and necessary repair. The IRS claimed it was a capital improvement and should be depreciated. The Tax Court agreed with the taxpayer that the replacement roof was necessary to keep the house in operating condition and didn't add to the value of the house -- hence current deduction.

Unfortunately, TC Summary Opinions are not precedent setting -- that is, the IRS doesn't have to follow the decision in other cases. However, this decision did cite an older case, Oberman Manufacturing Co. v. Commissioner, 47 T.C. 471 (1967), which was not a summary opinion.

There have been other cases with similar outcomes. One question that you will have to determine for yourself is whether your replacement system simply replaces the prior system or is an improvement. For instance, if the new system is more energy efficient or different heating/cooling capacity you might have difficulty supporting the "repair" position. This is an area that should be reviewed with a tax professional who will consider all of the specifics of your situation before providing advice.

Ira
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