topic Rental Property - Depreciation of retaining wall when costs were shared with neighbor in Investors & landlords

Rental Property - Depreciation of retaining wall when costs were shared with neighbor

phil- — Sat, 17 Aug 2019 21:27:20 GMT

I recent replaced the retaining wall on my rental property due to it failing. The retaining wall shares a boundary with my neighbor. I expanded the retaining wall at the request of my neighbor and he contributed 1/3 to the total cost of project. The total cost was about 30k and he contributed 10k. Do I depreciate the retaining wall in my tax return by the full amount (30k) or what my actual cost was (20k)? My neighbor's property is his residence, where my property is a rental property.

I've searched and had not luck, so appreciate any advice.

Re: Rental Property - Depreciation of retaining wall when costs were shared with neighbor

Carl — Sat, 17 Aug 2019 22:46:56 GMT

If you are the sole legal owner of the retaining wall (i.e.; it's on your side of the official property line) then you will claim and capitalize the entire cost, regardless of who paid for it.

Re: Rental Property - Depreciation of retaining wall when costs were shared with neighbor

Anonymous — Sun, 18 Aug 2019 06:30:55 GMT

under what code section can you deduct or depreciate something you haven't paid for.

Re: Rental Property - Depreciation of retaining wall when costs were shared with neighbor

phil- — Sun, 18 Aug 2019 11:50:38 GMT

Thanks for the quick replies.

Yes- the work was done on my side of the boundary and I paid for all the work, which was invoiced to me.

I was replacing about a 20 ft section where the wall was failing. My neighbor wanted to increase the scope of the work to add an additional section of new wall so he could add more backfill to his section. The sharing of costs was not easy to estimate since it was just one big job, but we agreed to split most of the costs 1/3 - 2/3. This wall is about 6 ft high, so also serves as a boundary fence and has benefit to me also.

I ended up paying all the design and engineering costs myself.

I can't find anywhere in the forums or tax code that really covers depreciating a capital expense, where I received some contribution. My neighbor won't depreciate this because his is not a rental property.