Accounting & Bookkeeping & Small Business Forum

[Larry]

So I have a client who has two businesses running out of their home. the entire downstairs is for business. But they have a dock on the water that cost them some big bucks. This can be depreciated not as a business expense but as a personal property deduction right?

[JerryWeygandt]

Probably not, based on what you have said so far. There is not a personal property deduction for federal taxes. The dock is an improvement to the property, increases their basis in the property, and will increase the value of the property if and when they sell the property, however, unless it is used in one or both of the businesses, they cannot depreciate personal property, only business property.

[FredLip]

In the first floor, 5-year business properties are:
computer outlets
internet jacks
phone jacks
kitchen equipment (microwave, range, oven, exhaust hood, cabinetries)
window blinds, shade,
cable TV Coax
carpets

the outside 15-year land improvements can be allocate as business property if it is for the use of business entertainment purposes for their clients.

the easiest way to use the home and maximize the depreciation deductibles is to place the house under business name, they can depreciate the whole property under 5, 7, 15 & 27.5 years and any expense to maintain the house.

[Larry]

Please explain what you mean my "put the house under a business name" what exactly do you mean by that? Go down to the court house and transfer the title to a company?

[FredLip]

Hi Larry,

Classify the house as a business asset. Just like many companies provide housing & cars for their CEO & other key employees.

No, you do not need to go to the court house, if your client files business taxes with their SSN and not EINs, they do not need to file anything with anyone, they can even go back to the year they started the business to do a catch up depreciation and claim paid taxes back from IRS.

If your client files business income taxes with EIN not SSN, they can hire a title company to change the title for them from SSN to EIN and start receiving tax benefit this year. (but no catch ups depreciation).

[Larry]

Thank you very much :D

[ethan.simond]

you should have to named your business very attractive.and gave rise to advertisement.ok :D

[Ahshucks]

I don't know that I would feel comfortable with that scenario, unless the "personal" residence and dock is used solely for business purposes. As with leased automobiles they may have to recapture their personal use as income and you're right back to square one except you have offered their home up to bankruptcy proceedings should that ever occur to their business.

By code, you are allowed to deduct the business use of your home. See publication 587. Entertainment expenses are limited and must be documented. I can't configure a way that a dock would be entertaining even with a client visitation register, do you think an IRS agent would agree with that?

[QBConsultant]

Not to mention that when they sell the home, any gain will be taxable as business income.