Hello guys, I am working on my EA and I already passed the business portion last year. I have two questions that I don't believe where covered during my studying:
- A water heater in a rental house is an improvement. It's depreciable life is the same as the house, 27.5 years. Everyone knows a water heater will never last that long, so you'll be replacing it in about 7 years. When a water heater in your asset list dies is the most common way to treat it is to dispose of it as a partial disposition? the asset would be treated as "sold" for $0, the basis would be the adjusted basis of the water heater (cost - taken depreciation) and the resulting loss would post on 4797?
Can't find any examples related to water heaters for partial dispositions, but I assume it works the same, except we don't have to worry about cost segregation since we know the basis.
- As far as safe harbors for repairs, I had not notived that the $2,500 de minimis safe harbor was for costs to "acquire or produce" property. Wouldn't this generally mean it can't be used in a regular rental house operation, and then we have to look at the small taxpayer safe harbor?
Thanks in advance.