Our real estate business is a Family LLC Partnership, and in our 1065 we report business income separately from the rental income of the individual properties. Our “business income” is negative because money coming in is the rental income, and we declare our expenses for the central office separately from the individual property expenses.
We put a “new roof” on one of our commercial rental units last year. The tenant was complaining about serious leakage and wanted more than another patch job. It seems to be a coating treatment and is guaranteed for 10 years. We spent about $35,000.
It seems that this work should be classified as a depreciable improvement. The Turbo Tax, however, won't let us depreciate it because our “business income” is 0, although the rental income from the specific property more than covers the cost like any property expense listed. Logically it seems like it can be depreciated and recorded on the Form 8825 for that property, but the Turbo program won't let us do that. In the past we had an accountant who depreciated similar improvements in this way, typically for a 7 year period, and in fact there are several property improvements now on the depreciation worksheets. Also, it is unclear whether the depreciation period for the roof can be less than the life of the building, from what the instructions seem to indicate.
Can you offer any guidance?
Sounds like you're in the section 179 area and you can't use that if you don't have enough business income.....so if your rental does not rise to the level of a trade/business and you don't have enough business income you can't use section 179 but have to depreciate the roof over 39 years as non residential rental property.