Can I deduct agricultural fencing using section 179 on schedule E? Own farm, flat lease to farmer, I bought fencing.

[Cattlerancher]

@view2 , Can sec 179 be used in Rental Properties?

[view2]

Section 179 Not Allowed on Rental Property

To qualify for the section 179 deduction, your property must have been acquired for use in your trade or business. Property you acquire only for the production of income, such as investment property, rental property (if renting property is not your trade or business), and property that produces royalties, does not qualify.

Per IRS Publication 946 How to Depreciate Property,

The special Depreciation  Allowance may be available.

[Cattlerancher]

Thank you

[view2]

Your welcome.

[TaxGuyBill]

I realize I'm three weeks late on this, but I stumbled upon this question right now.

Section 179 CAN be used for SOME rental property.  It can not be used 'in connection with Lodging', so it can not be used in connection with renting out a residential home.  However, if it is just renting out the farm, many items might qualify for Section 179.

Publication 225 even specifically says "agricultural fences do qualify as section 179 property".
<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p225/ch07.html#en_US_2016_publink1000218185">https://www.irs.gov/pu...>

[TaxGuyBill]

Sorry, I hit enter too fast.

Yes, it is a "gray area" because, as View2 pointed out, whether or not it is a "trade or business" is a tricky thing.  However, the Tax Court has sometimes ruled that even a SINGLE rental property could be a "trade or business".

[Cattlerancher]

@TaxGuyBill Good to know, thanks for sharing! The difficulty might be in getting TurboTax software to allow a rental asset the option to take section 179. Currently it does not, even using "Other Property"/"Other Asset Type" it appears not to be an option in the Rental Income section.

[view2]

Property used for lodging.   Generally, you cannot claim a section 179 deduction for property used predominantly to furnish lodging or in connection with the furnishing of lodging. However, this does not apply to the following types of property

Quote "Property used by a hotel or motel in connection with the trade or business of furnishing lodging where the predominant portion of the accommodations is used by transients"

<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p946/ch02.html">https://www.irs.gov/publications/p946/ch02.html</a>

Schedule E NO
Schedule C Yes
.

[Cattlerancher · Accepted solution]

I thought you can but when I tried it, there is no sec 179 option in the Rental Properties section. I'm going to look into this today and reply back.

I suggest if you built a new Ag fence or did an expensive major rebuild to the fence to depreciate it, otherwise write it off as an expense in Repairs and Maintenance. Ag fencing uses a seven year recovery period, 150DB as described in the page snip below;

[Greenblue]

I am in a similar situation.  I installed a fence on land that I lease for grass/cattle (reported on Schedule E as passive income).  I thought that I qualified for a Section 179 deduction (take 100% depreciation).  However, Pub 946 and 225 have an exception: 

Generally, you cannot claim a section 179 deduction based on the cost of property you lease to
someone else. This rule does not apply to corporations.  IRS Pub 946

Since I lease the land out and am not a corporation, my fence does not qualify for special depreciation.  I will end up depreciating over 7 years and report on Form 4562, Part III MACRS.

Am I missing anything?