Q. During your Ag Tax program in February, you indicated that drainage tile could qualify for 100-percent bonus depreciation for cash rent landlords. I have looked at the IRS website and cannot find an explanation, particularly for cash rent landlords. Is there a break if the drainage tile installed in the spring of 2010?
A. The 100-percent bonus depreciation was enacted at the eleventh hour by Congress in mid-December 2010, so the IRS is no doubt a bit overwhelmed in terms of responding to this last-minute law change. Congress enacted the 100-percent bonus retroactively, so that it applies to assets placed in service from Sept. 9, 2010 through Dec. 31, 2011. The criteria are quite simple: It is a new (not used) asset and has a depreciable class life of 20 years or less. Drainage tile has a 15-year class life, and accordingly, it is eligible.
If you installed drainage tile in the spring of 2010, it qualifies for 50-percent bonus depreciation. But as I have expressed in prior writings, don't confuse this 50-percent or now 100-percent bonus depreciation with the longstanding Section 179 deduction. Section 179 first-year depreciation is subject to many restrictive rules, including both a business income limit and an anti-lessor restriction that generally make it unavailable for cash rent landlords.
