I am developing RV park on a 12 ac property. I fenced property w/ farm fence. cost 13K. Depr period farm fence different from residential fence? Special depr allowed?

[taxsaver]

I read farm fence can be depreciated over 5 years somewhere.....

[ColeenD3]

An RV park is a business, not a farm (although a farm is still a business), and not personal property. Land improvements do not qualify for Section 179, but they do for bonus depreciation. Normal depreciation is over 7 years.

Keep in mind that you do not have a business yet. You only have a fence.

Land improvements

What you have is a start-up cost.

Start up costs are those expenses incurred in planning and setting up the business, costs you incur before you open the door.

A portion of startup and organizational costs can be expensed (written off in your first year). The remainder can be amortized (written off over a period of 15 or more years).

Here is how it works:

Expenses paid or incurred after October 22, 2004: 

 - You can deduct up to $5,000 in startup and $5,000 organizational costs as current expenses if the costs are under $50,000, respectively.

 - You can choose to amortize startup and organizational costs greater than $5,000, respectively, (but less than $50,000, respectively) over a period of 15 years.

 - If your startup or your organizational costs are more than $50,000, respectively, the excess amount reduces the amount you can deduct.

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Note: A cash-basis business cannot deduct or write off (amortize) these costs until they are actually paid.

[taxsaver]

I need to clarify my description. My RV park is already a working RV rental. I have 2 stationary units that I rent out. I have been doing this for 2 years. Last year I fenced the property and created a dog pen for guests to leave their dogs in a nice environment while they are out sightseeing. The total cost of this was approx. 13K. I created an asset for this under my business as sole proprietorship. So it's not really a start up cost more like an investment in the business to improve services. If I don't want to depreciate the fence over 7 years, can I take the special depreciation of 100% in the first year? Thanks. 

For that matter for the future, if I improve my site(s) with better lighting, offer a wash station to clean fish, maybe a little spa....can I treat this as improvements to my business and also take special depreciation or 179 on those assets? Thanks again. 

[PatriciaV · Accepted solution]

Yes, you may be able to depreciate the fence and other Improvements you made to your business property if they are a "betterment," restoration, or adapts the property for a new or different use. Other additions to the amenities of your RV Park may be fully deductible as expenses or repairs if they fall under the IRS definition of Repairs.

IRS Pub 946 How to Depreciate Property makes a distinction between repairs and improvements.

"You generally deduct the cost of repairing business property in the same way as any other business expense. However, if the cost is for a betterment to the property, to restore the property, or to adapt the property to a new or different use, you must treat it as an improvement and depreciate it."

Improvements do not qualify for Section 179 depreciation, but they should qualify for the Special (Bonus) Depreciation Allowance. TurboTax will help you make these elections when you enter the Improvements under Business Assets for Depreciation. Choose Intangibles, Other Property >> Land Improvements and follow the interview to take the Bonus Depreciation deduction.