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Posts: 3
Reply with quote  #1 
I installed new carpet in 2011.   I've been depreciating it over a 5 year period.   In 2013, the tenant moved out and the carpet was destroyed.   I installed new carpet, keeping his deposit.

Do I keep depreciating the old carpet for the remainder of the years, and then depreciate the new carpet for another 5?   Do I take a loss on the old carpet?  


Posts: 3,787
Reply with quote  #2 
You deduct the depreciated value of the old carpet from their deposit.  
2013 move out -2011 new carpet = 2 yr old carpet
5 yr depreciated life - 2 yr old = 3 yrs of life supposed to be left.
3/5 of carpet cost should be charged to tenant's deposit.  
Example:  If carpet was $2000 (x 3/5) = $1200 charged against tenant deposit.  Return the rest (if any) as that is all you can keep (3/5 of the cost.)
Once done, old carpet has been paid for.  Remove it from taxes and start the 5 yr depreciation on the new carpet..  

Posts: 178
Reply with quote  #3 
You 'dispose' of the asset (carpet) and start a new asset (new carpet).  The old carpet would be a loss, although you 'sold' it with the deposit money.  The former renter 'purchased' it.

So, no net gain or loss on the carpet, but the selling price and costs should equal the amount you have left in depreciation, and the amount you collected.

You  should have  charged the tenant the remaining depreciation, not the full replacement costs.


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