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How to handle large capital project containing several smaller projects

Hi.

For tax purposes, I'm wondering what is the proper way to handle a capital project that contains several smaller capital projects, each with different completion time points.  Specifically, we recently bought some land that I'd like to set up for running cattle.  So, we have had to clear some of the land, build fences, dig a pond, weed-kill brush, and build a cattle-guard, all before we can begin to run cattle.  My question, then, do I treat all of the above-cited activities under one capital project, and, if so, what to I make my "go-live" date for each of the individual projects as they are completed?  Or, do I treat each project individually (as though independent)?  The same "go-live" date question applies here as well since many of the projects will be completed well before cattle are introduced.

 

Thank you,

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2 Replies
JeffreyR77
Expert Alumni

How to handle large capital project containing several smaller projects

As you have ;described these activities, the individual pieces are collectively the total larger capital project.   

 

In this case, all these smaller projects need to be completed prior to starting to run cattle on this new property. 

 

Recognizing the pond or the brush clearing separately in this case provides no value. 

 

I recommend including all the costs as one capital project.  Your your "go-live" or in service date is the date all the projects are complete and the land is available for its intended use whether cattle are being introduced at that date or not. 

 

It would be the date when the preparation work is complete and the cattle could be introduced.

 

When is My Capital Project In Service Date?

How to handle large capital project containing several smaller projects

Thank you very much Jeffrey R77.  Your response was very useful, in addition to the link to Publication 225 which helped identify what activities qualify for depreciation.  Made my life much easier!!

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