How is the $2,500 limit for the de minimis safe harbor election figured in the case when ownership of a rental property is split between multiple co-owners?
Example scenario: A new AC + furnace were installed (replaced old AC and furnace) for a total cost of $7,800 at a rental property owned by four people, each of whom shares equally the income and expenses for the rental activity. If each of the co-owners is responsible for 25% of the cost, that amounts to a $1,950 expense for each co-owner. For the purposes of any potential safe harbor election, does the IRS view the expense as $7,800 or as $1,950? Can each co-owner elect to use the de minimis safe harbor to deduct their $1,950 share of the expense on their Schedule E?
