I am about to start a business model for my new Home Staging business.
I'm a bit confused about the accounting treatment for my furniture assets.
The business concept is to offer a service of consultation and furniture rent to real estate owners in order to make the property more appealing to buyers. In the plan the furniture will be rented for 3 months or less if the property sold before. Payment from customer are 50% at contract signature and 50% at delivery of the furniture. When the contract expire the furniture will be stored back to inventory.
Apparently the "home staging service" can be considered as operating lease and the furniture will be booked in Fixed Asset and depreciated every year. What will be a correct depreciation rate from IRS perspective?
Thank you!!
Lele

QUOTE," In the plan the furniture will be rented for 3 months or less if the property sold before. . .When the contract expire the furniture will be stored back to inventory. "--- As you can see, you can depreciate your furniture from the time, when it is ACTUALLY considered placed in service for both business and trade purposes (also for investment purposes).If you bought the furniture during the the first nine months in a year, then you need to apply half-year convention, not mid-quarter convention to depreciate your furniture. For instance, assume that it was placed in service in Jan. 2010 and was rented until MArch 31st of 2010 for three months, then you need to depreciate it by using either regular MACRS ,Alternative MACRS, or Alterntive Depreciation System whatever method you want under half-year convention in this case as assumed above. Also assume that you bought new furniture and is subject to bonus depreciation( as it is new and bought and placed in business and trade in 2010). So, under the bonus depreciation provision, you can immediately write off $200 in 2010; 50%* $400, FMV of the furniture that you bought in 2010.
So good news is that unlike regular depreciation deductions, which must be pro-rated to reflect that property has been in service only for a portion of a tax year, three months in this particular case, the 50% bonus deduction is allowed in full the year property is placed in service EVEN IF that date is the last day of the year.


And also you can depreciate ( salvage value is ignored under MACRS/ACRS as far as I know) the remaining depreciable cost after deducting your bonus depreciation.This means that you can write off $200 as said above, and depreciate on the remainng $200( $400-$200=$200) $7.15 in 2010 ; $200*14.29%*3/12=$7.15. So, in total, you can depreciate $207.15( $200+$7.15) in 2010 for the furniture rented for three months in the year. The book vlaue of the furniture in 2010 after the depreciation'd be $192.85;$400-$207.15=$192.85.