In order to take 179 on anything, it has to be able to be depreciated..............so, if it can be depreciated, it can be---most likely-------depending upon the item---------can be expensed under 179.   The poster whose tax guy said it could not be 179 but could be depr-------might check with the tax guy again to make sure there was no miscommunication.

179 and depr requires active business involvement in a production activity (for this application) in order for what is deemed to be a land improvement to be a depr item, and therefore available for 179.............cash landlord is not deemed to be actively involved in the production process-------UNLESS he is involved with management, and then he would have to report his rent on Sch F and pay self employment taxes on the net---------cannot have the cake and eat it also.

Tenant paying for the tiling---------and deducting it from rent--------does not solve the issue for the landlord, unless such rent reduction is done COVERTLY.   If the renter pays a bill on behalf of the landlord, and is reimbursed for that bill by a reduction of the amount of rent..............the landlord has to pick up that payment made as rent income, and as an expenditure, and handle the expenditure in the same manner as if the landlord made the payment himself.

What happens if the tenant makes the payment, and tells no one, ie is in cahoots with the landlord, and reduces the rent??     First, the tenant is supposed to issue a 1099 on the amount of rent paid---------if the tiling "agreement" is not included, the tenant becomes part of the "tax fraud".   If the tenant issues the 1099 correctly, and the landlord chooses to ignore it, then IRS will see an inconsistency in the landlords tax return...........so, it is pretty hard to engage in that practice without it being obvious, or putting someone at risk.

If the tenant pays the bill, and depreciates/179 the tile as leasehold improvement...........and reduces the rent slightly over a period of years------------IRS would probably NOT notice it, but both parties are engaged in activities that would be definitely frowned upon.

If the tenant pays the bill, does not reduce rent, tenant can still depr/179 the tile as leasehold improvement.........taken over usual life, but if the lease is lost before that life is achieved, then the remaining balance can be expensed in the year the lease is lost as an abandoned leasehold improvment.

The whole deal on tile is--------------tiling and fencing are deemed to be land improvements, NOT depreciable, since they increase the value/become a part of land........period.

However, special exception to the rules NOT allowing depr of land improvements is when those land improvmeents are "......;an integral part of the production process"--------paraphrased.

Another example...........farmer cements his lane that leads to the machine sheds.............that cement is NOT depreciable since it becomes part of the land.     However, if that same cement is used as cement in a feedlot, and the feed lot is actually set up for and (eventually, at least) used to produce livestock for sale, breeding, etc, ie becomes "....an integral part of the production process"........the cement is depr/179.

Obviously, most would try to depr/179 the cement in the lane-----------not telling you what is "morally" correct, just relaying the rules as they are written.    Do people depr/179 things they should not per the rules--------of course.

However, expect your tax preparer to start getting obstinate about being free and fancy about deductions in the future, or not declaring income, since IRS is REALLY cracking down on ALL preparers-------penalties up the tail, having to register with IRS, having to fulfill continuing educational requirements, etc etc etc.

In the returns that we do............say for 1000.................the fines that can be levied by IRS can easily exceed that fee..............5000.    Do I really need to stretch my neck to help someone depreciate 5000 of cement, at a 15% tax savings?

Another area IRS says they are going to start cracking down on-----------expensing repairs.    Court decisions have established 3 basic elements to capitalizing and depr repairs----------if the item extends the useful life of the repaired item, if it increases the utilization of the item, or if it increases the market value of the item.    Now, it is obvious that no matter how you look at those items, such are pure judgement calls.  BUT, in order to determine WHOSE judgement is going to be acceptable------------what procedure is used??    If IRS says one thing, and your tax guys says the other------and neither will budge-------how will that be resolved?   Take it to court.

That's expensive.

So................if in doubt, capitalize the item-----------and expense it via 179 in that year.    IRS cannot quibble with that approach---------in fact, most agents will suggest that if they don't see it happening.   seems to be a quite simple procedure to me---------but you would be surprised at the number of preparers who do not do that, and allow big repair bills (as compared to the picture the sch F paints as to the farm operation as a whole) to float thru as period expenses.

It is going to get tougher-------------learn the rules.