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Regarding vacation rental / short-term rental: client

replaced sod (existing property, sod...
Regarding vacation rental / short-term rental: client replaced sod (existing property, sod replacement). For what it's worth, the rental property is adjacent to primary residence. Question: can the sod be depreciated? I'm inclined to "no" and treat it as a non-depreciable land improvement.
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Answered in 2 hours by:
3/10/2018
emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3,864
Experience: IRS licensed Enrolled Agent and tax instructor
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Hi. My name is ***** ***** I will be happy to help you.

While land itself is not depreciable, land improvements can be depreciated over 15 years. However, according to Rev. Rul. 2001-60 you may be able to deduct it as business expense. It depends on the interpretation and the actual purpose. Was the replacement necessary? Was it part of a major repair like septic for instance?

Here's the revenue ruling with couple of examples: https://www.irs.gov/pub/irs-drop/rr-01-60.pdf

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Customer reply replied 4 months ago
It was installing artificial turf / sod. It was dirt previously as the owner is slowing improving the lot. A portion benefits the personal residence and a portion benefits the short-term / vacation rental. I initially state "replaced" but upon additional questioning, it is 'new'. Not sure if that changes your answer. I'm thinking no depreciation / deduction?

I would deduct the portion allocated to the vacation rental as landscaping expense.

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What was the cost?

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Customer reply replied 4 months ago
Total cost = $4,000. I guess it could be considered an outdoor carpet (at least the portion that directly benefits the rental operation). I'll elect safe harbor given the rental portion being under $2,500.

If it makes the property more marketable it is a legitimate business expense.

emc011075
emc011075, Tax adviser
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