Friday, March 15, 2013

Depreciation for a Park Model

Q.  It seems to me I should be able to depreciate my Park Model as a trailer, using a 5 year life. My tax preparer has doubts. What is your opinion?

A.  I think your tax preparer is using sound judgement. Park Models are almost never moved, and since they usually become residential rentals, the MACRS life of 27.5 years is most likely the right choice. I realize many people want to depreciate these assets as quickly as possible, but stop and think in the long term for a moment. If you write the assets off in 5 years, you will have very little in the way of expenses to shelter future income. As raging inflation is bound to rear its ugly head at some point, you will ask more for rent, and have less to write off. Just think about it.

PS. Since my original answer, the Tax Court has disallowed depreciation of RVs. See Jackson, T,C, Memo 2014-160, August 7, 2014.

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