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My question relates to the availability of the Section 179 deduction for improvements to a car wash in 2017.

Submitted: 1 month ago.Category: Tax
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Answered in 3 minutes by:
3/22/2018
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 1 month ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,007
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi. …. My name’s Lane,

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents, since 1986.

I’m reading your question now.

Bear with me a moment while I type up my response.

….

Then if you have further questions we can go from there.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 1 month ago

The answer to your question depends on whether or not the equipment become attached permanently to the structure.

...

See this from U.S. Master Tax guide

...

  • Real Property does not qualify for the Section 179 Deduction. Real Property is typically defined as land, buildings, permanent structures and the components of the permanent structures (including improvements). Other examples of property that would not qualify for the Section 179 Deduction include paved parking areas and fences.
  • Property used outside the United States generally does not qualify for the Section 179 Deduction.
  • Property that is used to furnish lodging is generally not qualified for the Section 179 Deduction.
  • Property acquired by gift or inheritance, as well as property purchased from related parties does not qualify for the Section 179 Deduction (No, you can't sell equipment to yourself and qualify for Section 179).
  • Any property that is not considered to be personal property, may not qualify for the Section 179 Deduction.
  • Used Equipment (that is new to you) qualifies for Section 179, however used equipment does not qualify for Bonus Depreciation (if offered in a given tax year).
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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 1 month ago

However, it's likely that you do (if this becomes a permanent improvement) still qualify for bonus depreciation under §116.

...

Under the PATH Act, Sec. 168(k) provides a depreciation deduction equal to 50% of the adjusted basis of qualifying property in the first year it is placed in service for property placed in service in 2015, 2016, or 2017. The percentage phases down to 40% for property placed in service in 2018 and to 30% for property placed in service in 2019.

...

"Qualified improvement property" is a new class of nonresidential real property that is eligible for bonus depreciation, starting with improvements placed in service in 2016. It replaces the former class of qualified leasehold improvement property.

...

Qualified improvement property is defined in Sec. 168(k)(3) as improvements to the interior of any nonresidential real property placed in service after the date the building was first placed in service.

...

However, qualified improvement property does not include expenditures to enlarge a building, for any elevator or escalator, or for the internal structural framework of the building.

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Customer reply replied 1 month ago
Owner improved the property. Thinking the expenditure would be a qualified leasehold improvement under 168(e)(6) as it didn't enlarge the building or impact the internal structural framework of the building. As such, my sense is it does qualify for 179 treatment. Your thoughts?
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 1 month ago

Is it a permanent improvement? (does it stay with the structure)?

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Customer reply replied 1 month ago
I'll ask. This might be a few hours before I here back.
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 1 month ago

I'll be here ... If it does then it's not 179, but DOES qualify for bonus under 116.

...

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