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rds60
New Member

If I put a cattle fence on property I do not own, is it considered an expense instead of an asset?

 
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GeoffreyG
New Member

If I put a cattle fence on property I do not own, is it considered an expense instead of an asset?

That's a really interesting question.  Your answer would be that how you treat the fence for tax purposes (asset / expense) depends on your continued ownership rights in the fence (or your lack thereof).

Typically, when something in the nature of a permanent fence is installed, it becomes an improvement to the land (like a building or driveway), and is therefore owned by that landowner, as the fence cannot be easily removed and simply transported to another location -- like can farm equipment or portable electric generators, for example.

However, in the case of, say, a contractor who installed the fence and hadn't been paid, and who also had lien rights to the fence until such time as they are paid, this could be classified as a short-term asset (not subject to depreciation) on their financial books.

Similarly, if you installed a fence on a neighbor's property, with their full consent, and they signed some sort of contract or other legal agreement with you that the fence still belongs to you, then this would become a business asset to be capitalized, and depreciated (or to take the Section 179 expensing election).  Alternatively, if depreciated and depreciated, fences are considered 7-year MACRS property for tax purposes.

In the absence of any of that, though, it would seem clear that the fence would be legitimately classified as a business expense, if you no longer retain ownership rights to it (and because it is "attached," literally, to land belonging to someone else).

Thank you for asking this question.

View solution in original post

1 Reply
GeoffreyG
New Member

If I put a cattle fence on property I do not own, is it considered an expense instead of an asset?

That's a really interesting question.  Your answer would be that how you treat the fence for tax purposes (asset / expense) depends on your continued ownership rights in the fence (or your lack thereof).

Typically, when something in the nature of a permanent fence is installed, it becomes an improvement to the land (like a building or driveway), and is therefore owned by that landowner, as the fence cannot be easily removed and simply transported to another location -- like can farm equipment or portable electric generators, for example.

However, in the case of, say, a contractor who installed the fence and hadn't been paid, and who also had lien rights to the fence until such time as they are paid, this could be classified as a short-term asset (not subject to depreciation) on their financial books.

Similarly, if you installed a fence on a neighbor's property, with their full consent, and they signed some sort of contract or other legal agreement with you that the fence still belongs to you, then this would become a business asset to be capitalized, and depreciated (or to take the Section 179 expensing election).  Alternatively, if depreciated and depreciated, fences are considered 7-year MACRS property for tax purposes.

In the absence of any of that, though, it would seem clear that the fence would be legitimately classified as a business expense, if you no longer retain ownership rights to it (and because it is "attached," literally, to land belonging to someone else).

Thank you for asking this question.

View solution in original post

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