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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Tax
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Experience:  22 years of tax preparation experience, including individual, trust, and estate returns.
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I have a buddy named Chris. He operates a business that rents

Customer Question

I have a buddy named Chris. He operates a business that rents aircraft parts to motion picture studios for use in film production. He purchased most of the aircraft parts at auctions all throughout the United States. At the auctions, Chris usually acquired the parts in large quantities because he thought that he would be able to use at least some of them in his rental business. After a movie is finished, the studio returns the aircraft parts that it rented to Chris. The parts are often returned in damaged condition or with pieces missing. Chris sometimes attempts to repair a damaged part so that it can be rented again. Because these aircraft parts deteriorate over time, Chris believes that they have a useful life of under three years, and thinks he can classify them as three-year property. Can you figure out if he can or not?
Submitted: 8 years ago.
Category: Tax
Expert:  Arthur Rubin replied 8 years ago.

Thank you for using Just Answer.

 

I'm afraid that the IRS-approved depreciation schedules do not take into account actual expected life, but only expected life for the class of materials.

 

Airplanes are in asset class 00.21, which is considered 5-year property, with an actual life and alternative depreciation schedule (ADS) of 6 years. It seems unlikely that aircraft parts would have a shorter depreciation schedule.

 

In fact, I don't see a justification for treating them other than as 7-year property (12 years ADS), but a creative accountant might be able to find a justification.

 

Repair of a damaged part is a current expense, and, if a part is no longer usable, the remaining unrecovered cost can be written off, regardless of the depreciation schedule.

 

IRS Publication 946 has most of the information you can use on class life and depreciation.

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