Tax question on depreciation

[Carol1862]

When I told my DH I was going to ask you all this question he looked at me and said, “you know the answer”. I kind of do, but, still...

I sold a rental condo Dec 19 to a young couple. The selling agent is a friend and the buyers agent happens to be a neighbor of mine. Yesterday I saw my neighbor and he told me that the dishwasher (15 years old) flooded. Thankfully no damage. They were going today to buy a new one. I came home and DH and I decided to offer to buy it for them. (mid range, not top of line). They were ecstatic. They remind us of our own children and I hope someone would have done this for them.

My question is that it’s now 2020. Can I take this off depreciation of the condo? It’s only 2 weeks since I sold the unit but realize it’s a different tax year.

Ok, let me have it....

 

[njhowie]

Well, since you know the answer, I won't say it.

However, considering the cost of the new dishwasher is what, maybe $200, if you expensed it in 2019 as part of the sale reducing your gain by that amount the IRS will likely not even flinch.

 

[Cobra9777]

We had a somewhat similar situation... we sold a rental house in June of 2017. As usual at closing, we paid the buyer our portion of the 2017 property tax (Jan 1 through date of sale). The buyer pays total actual property tax at year-end. The amount at closing is estimated based on prior-year taxes (2016). If actual taxes are higher or lower than estimate, the two parties are contractually obligated to settle-up, per the closing documents.

Well, the property taxes went up, A LOT. The buyer contacted us in January 2018 with the additional prorated amount that we owed and we sent her a check. Even though we did not pay until 2018, I claimed it as an additional cost against the 2017 sale. After some research, I seem to recall that there WAS a way to claim it in 2018, but it was messy. Our portion was only a few hundred dollars, so I decided to keep it simple. If by some chance the IRS audits us and disallows the cost for 2017, I'll just revise the 2018 return to claim it there. So, not really much risk.

 

[SecondCor521]

Not legally. Unless it were somehow written into the sales contract, which it sounds like it wasn't. Or if "sold" means something other than selling (like rent with an option to buy, or something like that), which also sounds unlikely.

 

[CaliKid]

Not legally. Unless it were somehow written into the sales contract, which it sounds like it wasn't. Or if "sold" means something other than selling (like rent with an option to buy, or something like that), which also sounds unlikely.

Ya, but maybe an addendum or amendment can be drawn up now to factor in the washing machine. Not sure it has to be backdated but probably wouldn't hurt.

 

[SecondCor521]

Ya, but maybe an addendum or amendment can be drawn up now to factor in the washing machine. Not sure it has to be backdated but probably wouldn't hurt.

Definitely tax fraud. Not worth a felony and prison time if caught and prosecuted, IMHO.

 

[Gumby]

Definitely tax fraud. Not worth a felony and prison time if caught and prosecuted, IMHO.

I wouldn't take a chance just to to save $44 on my taxes.

 

[Jerry1]

Definitely tax fraud. Not worth a felony and prison time if caught and prosecuted, IMHO.

I wouldn't take a chance just to to save $44 on my taxes.

By the same token, no one’s going to prison for $44. You’d get a fine and it wouldn’t be worth it, but you wouldn’t go to prison.

 

[SecondCor521]

By the same token, no one’s going to prison for $44. You’d get a fine and it wouldn’t be worth it, but you wouldn’t go to prison.

Unless they choose to make an example out of you. I bet Lori Laughlin thought cheating on her kid's SAT wouldn't involve prison.

Granted, OP isn't famous. I still wouldn't risk it.

And even if one doesn't get caught, there is always guilt, which isn't fun (speaking from personal experience).

 

[Carol1862]

ok, as my husband said, he really doesn’t look good in orange and rather not go to prison at his age!! Too bad about it being just one week into a new year, but that’s how it goes.

Thank you to everyone who responded

 

[SecondCor521]

ok, as my husband said, he really doesn’t look good in orange and rather not go to prison at his age!! Too bad about it being just one week into a new year, but that’s how it goes.

Thank you to everyone who responded

I don't think it's a question of 2020 vs. 2019, but a question of before the sale vs. after the sale.

 

[ERD50]

I don't think it's a question of 2020 vs. 2019, but a question of before the sale vs. after the sale.

Right, it's actually both (or either, depending on your view?). Either one disqualifies it.

OK, I'll be an a$$hat here - since OP already knew the answer (2 times over), was the opening post just a "humble brag" that they helped these people out? Nice of them to do that, a little crass to announce it.

-ERD50

 

[SecondCor521]

Right, it's actually both (or either, depending on your view?). Either one disqualifies it.

OK, I'll be an a$$hat here - since OP already knew the answer (2 times over), was the opening post just a "humble brag" that they helped these people out? Nice of them to do that, a little crass to announce it.

-ERD50

I took it as a request for permission to do something they knew was wrong. I've started to write similar posts for similar reasons, and then stopped before posting because either (a) I talked myself out of doing it and thus no need to post, or (b) I talked myself into doing it, and either (i) decided it was OK and thus no need to post, or (ii) decided it wasn't OK and thus no sense in announcing my illicit behavior to the world.

I wouldn't #humblebrag about buying a dishwasher. Doesn't seem big enough to me. So I'm projecting that onto OP. Nice and all, but not really that big of a deal.

 

[Gumby]

I think it was a very nice thing to do, and I'm glad that they did it. I see the post in the same vein as just about every Dear Abby or Ann Landers letter I ever read in the paper (or Suze Ormond's "Can I afford It?") The OP already knew the right answer but was hoping somebody else would tell her that it didn't have to be that way. Nothing ventured, nothing gained.

 

[CaliKid]

...

OK, I'll be an a$$hat here - since OP already knew the answer (2 times over), was the opening post just a "humble brag" that they helped these people out? Nice of them to do that, a little crass to announce it.

-ERD50

...

I wouldn't #humblebrag about buying a dishwasher. Doesn't seem big enough to me. So I'm projecting that onto OP. Nice and all, but not really that big of a deal.

Crass or a humblebrag in your opinion. To me it was a nice gesture and they made comment of it in a group of friends. Certainly not worthy of being called out in some negative way in my opinion. I would say there have been far worse "infractions" for the humblebrag police to worry about!?

 

[SecondCor521]

Crass or a humblebrag in your opinion. To me it was a nice gesture and they made comment of it in a group of friends. Certainly not worthy of being called out in some negative way in my opinion. I would say there have been far worse "infractions" for the humblebrag police to worry about!?

To be clear, I didn't think it was a humblebrag. I was responding to ERD50's comment.

Also, no judgment by me, as I've been tempted by similar things and asked similar questions and have probably done worse.

 

[Jerry1]

Unless they choose to make an example out of you. I bet Lori Laughlin thought cheating on her kid's SAT wouldn't involve prison.

Not even close. Not even in the same universe. No one is going to jail for $44. They might audit you. They might catch your error. They would then send you a letter telling you the change in your return due to audit adjustments and you would pay it and it would be done.

Frankly, I doubt they would even notice it. Are you telling me that real estate records are good enough, complete enough that there’s not already an error rate of a few hundred dollars in the basis calculation? More likely they would challenge new carpet or something you expensed that you should have capitalized.

Personally, I wouldn’t bother, but I think a reasonable argument could actually be made that you felt compelled to stand behind your sale once you learned that the dishwasher went bad. If you’re in business that could be considered a type of goodwill. Maybe it wouldn’t go to the basis, but it could conceivably be considered a selling expense. Especially if the goodwill is between the OP and the selling agent. In that case, the year (2020 and not 2019) would be an issue.

Old Joke

A businessman was interviewing job applications for the position of manager of a large division. He quickly devised a test for choosing the most suitable candidate. He simply asked each applicant this question, "What is two plus two?"
The first interviewee was a journalist. His answer was, "Twenty-two".
The second was a social worker. She said, "I don't know the answer but I'm very glad that we had the opportunity to discuss it."
The third applicant was an engineer. He pulled out a slide rule and came up with an answer "somewhere between 3.999 and 4.001."
Next came an attorney. He stated that "in the case of Jenkins vs. the Department of the Treasury, two plus two was proven to be four."
Finally, the businessman interviewed an accountant. When he asked him what two plus two was, the accountant got up from his chair, went over to the door, closed it, came back and sat down. Leaning across the desk, he said in a low voice, "How much do you want it to be?" He got the job.

 

[Carol1862]

Right, it's actually both (or either, depending on your view?). Either one disqualifies it.

OK, I'll be an a$$hat here - since OP already knew the answer (2 times over), was the opening post just a "humble brag" that they helped these people out? Nice of them to do that, a little crass to announce it.

-ERD50

You couldn’t be further from the truth. I wasn’t bragging that I helped them out. I was asking because there are always different rules that the layman isn’t aware of. I thought perhaps because it was only one week into 2020 that it was an extenuating circumstance. I didn’t think it had to be done prior to sale. But I absolutely wasn’t bragging that I bought a $450 dishwasher for a young couple. This is a safe place, among friends and like minded people, to ask these type of questions.

Thank you to everyone that answered and educated me

 

[Cobra9777]

If replacing the dishwasher had been a condition of sale, then it would have been a legitimate deductible selling cost even if the actual expenditure had occurred after the sale and in a different tax year. Of course, the correct thing to do in such a case is to claim it in the tax year that the expenditure actually occurred. As I posted before, based on my research a couple years ago, this is do-able but a little messy.

In OP's case, the $450 is not a legitimate cost of selling the property, not because of when it occurred, but because it was not a condition of sale.