Depreciating components of Child Care home

[Possi]

My client purchased a new "whole house generator" for $8500, and soon thereafter had to replace his HVAC for $7000.00.

Must I depreciate both of these items over 39 years, as is the child-care home office depreciation schedule? 

Thanks! I can't find this specific answer anywhere! 

[Terry D EA]

Wouldn't these items fall under the percentage of the space used as an indirect expense? I think the 39 years is a stretch. I have never seen an HVAC unit last that long. Not sure about the life of a whole house generator. I say 10 years is best for the HVAC.

[Possi]

Well, the depreciation for the home, in the case of the child care business, should be 39 yrs, if I'm correct.

I was thinking the components would follow the same schedule since they are permanent components of the home. 

I know for rental property the HVAC would be 27.5, not sure about the generator. 

I was actually hoping to be wrong, so that I could take a more aggressive approach. 

[Max W]

The IRS has issued several cost segrgation guidelines for about 6 industries.

Both Gerators and HVAC are considered 1250 (39 yr) property as they are integral to the operation of the building.  There are some exceptions such as electrical equipment for powering refrigerators.

https://www.irs.gov/businesses/cost-segregation-atg-chapter-7-3-industry-specific-guidance-retail-industries

 

[jklcpa]

Reg 1.48-1(e)(2)

(e)Definition of building and structural components.

Quote

(2) The term “structural components” includes such parts of a building as walls, partitions, floors, and ceilings, as well as any permanent coverings therefor such as paneling or tiling; windows and doors; all components (whether in, on, or adjacent to the building) of a central air conditioning or heating system, including motors, compressors, pipes and ducts; plumbing and plumbing fixtures, such as sinks and bathtubs; electric wiring and lighting fixtures; chimneys; stairs, escalators, and elevators, including all components thereof; sprinkler systems; fire escapes; and other components relating to the operation or maintenance of a building. 

 

I would treat a whole house generator as a structural components because, unlike a portable generator, these require a fuel source be plumbed, tied into the main electrical system of the house, and are usually installed on a pad much like an a/c unit would be. 

Edited June 4, 2019 by jklcpa
formatting

[Possi]

On 6/3/2019 at 9:56 PM, jklcpa said:

Reg 1.48-1(e)(2)

(e)Definition of building and structural components.

 

I would treat a whole house generator as a structural components because, unlike a portable generator, these require a fuel source be plumbed, tied into the main electrical system of the house, and are usually installed on a pad much like an a/c unit would be. 

Thanks! I don't know why I'm never notified when I have a response or comment to something I posted, and I was not checking it like I should have. Now I can wrap this one up. They will be disappointed because I'm sure they think, like every other home business taxpayer, it would be expensed. I told them from the beginning that it would be depreciated. I just wasn't sure of the method. They'll never recover the expenses for both of these items. Oh well, that's life in the big city. 

Thanks again for all the responses.

[jklcpa]

5 hours ago, Possi said:

Thanks! I don't know why I'm never notified when I have a response or comment to something I posted, and I was not checking it like I should have. Now I can wrap this one up. They will be disappointed because I'm sure they think, like every other home business taxpayer, it would be expensed. I told them from the beginning that it would be depreciated. I just wasn't sure of the method. They'll never recover the expenses for both of these items. Oh well, that's life in the big city. 

Thanks again for all the responses.

 

That would depend on your selections of notifications you receive.  Two reasons I can think of for you not receiving a notification are because I didn't quote you, and you aren't "following" this topic.  You can also get popup notifications if you set your browser to do that, AND that only happens when you are logged in and are active on the site either directly or by leaving a tab open.

[DANRVAN]

On 6/3/2019 at 1:18 PM, Possi said:

My client purchased a new "whole house generator" for $8500, and soon thereafter had to replace his HVAC for $7000.00.

Must I depreciate both of these items over 39 years, as is the child-care home office depreciation schedule? 

Thanks! I can't find this specific answer anywhere! 

The courts have held HVAC as personal property in cases where the primary purpose is to maintain the proper temperature and humidity of equipment.  

Such as in the case of Piggly Wiggly v Com. where primary purpose of HVAC was to meets the needs of refrigeration equipment instead of the comfort of customers and employees.