I have a questions in regards to an assignment I have:

The question is:

Anthony has a lot of musical instruments that he rents out to students. They are pretty worn out and he is thinking about replacing them. He would like to know what the proper tax treatment is for instruments that he purchases for rentals. Can he expense them? Does he have to depreciate them? If he has to depreciate them, what is the proper method for depreciation? Other information not shown in the questions, Income is reported on a calendar year basis and are rented to students on school year. HE collects 6 month rent at a time (september-february).


---My response would be that the instruments can be classified as leasehold cost because they are rented. Consequently, the instruments can be capitalized and amortized over the lease term. The rental cost would be spread out across the term of the lease.


I am unsure if this is the correct answer for this questions. Please assist. I am not sure if the fact that the instruments are rented on a different term then his tax year makes a difference.