I have posted this question to the Bogleheads financial forum (which usually gets excellent responses), but since it is specific to boaters I thought someone here might have the answer, based on your experience renting/leasing a privately-owned marina slip. Thanks in advance for answers and insight!
I own a slip in a private marina which is organized as a condominium. Individual slip owners have an undivided percentage ownership of the docks, pilings, breakwater, parking lot improvements, harbor office, etc. Unlike a residential condo, there is no "unit" that belongs to each owner individually. Instead, each slip owner "owns" the air above and the water below our respective slips, in addition to an undivided percentage of all the improvements attributable to the marina as a whole.
I anticipate leasing my slip to another boat-owner, which means I will own rental property. I am trying to determine how to calculate my basis for depreciation purposes, and also what depreciation period qualifies for this type of property.
With a residential or commercial rental, one allocates the value or purchase price between land, improvements, and personal property (if any) such as a kitchen refrigerator. Because the marina is on leased land, the association does not have a fee simple interest in either the tidelands or the uplands of the marina. That would imply that my purchase price can be allocated 100% to depreciable improvements, and 0% to non-depreciable land.
However, a boat slip does not seem to fall under either the 27.5-year residential depreciation rule, nor the 40-year commercial property rule. My searches on the IRS web site suggest this might be Section 1250 property (not sure), although the reference below says that wharves, docks, fences, etc. are "specifically excluded from 15-year property".
Does anyone here have experience with renting and depreciating a marina condominium rental?
http://www.irs.gov/Businesses/Cost-Segr ... amework#12
Section 1250(c) defines "section 1250 property" as any real property, other than section 1245 property, which is or has been subject to an allowance for depreciation. In other words, § 1250 property encompasses all depreciable property that is not § 1245 property.
Land improvements (i.e., depreciable improvements made directly to or added to land), as defined in Asset Class 00.3 of Rev. Proc. 87-56, may be either § 1245 or § 1250 property and are depreciated over a 15-year recovery period. Buildings and structural components are specifically excluded from 15-year property. Examples of land improvements include sidewalks, roads, canals, waterways, drainage facilities, sewers, wharves and docks, bridges, fences, landscaping, shrubbery, and radio and television towers. Note that some activity asset classes also include land improvements such as asset class 57.1 of Rev. Proc. 87-56.