I have a rental building with 3 water heaters. They all needed to be replaced and were under warranty. I had to pay for labor to replace them (for which i issued a 1099 to independent contractor), but not the water heaters themselves. Do i depreciate them at the value they're worth or not at all since i didn't pay for them? The previous water heaters were with the building before i took ownership of the building.
the only cost you incurred was for IC's to replace them. how much? if the amount was not significant I would just expense them as repairs. if it was a large amount they may still qualify for expensing under the de - minimus rules (under $2,500). they are considered part of the real property, permanently attached so the life would be 27.5 for residential 39 years for commercial property if they don't qualify for expensing