Yes, you can deduct the entire cost of the fence using the 100% bonus depreciation rules.
CAUTION:Please keep in mind that most states do not recognize the IRS rules allowing bonus deprecation so you may have to depreciate the fence as a land improvement on your state tax return(generally over 7 years if reported as farm land improvement on Schedule F or over 15 years if reported as a rental property on Schedule E).
As you mentioned in your original post,Publication 946does correctly state that the fence does not qualify for the Section 179 deduction but it is not because you lease out the land, it is because land improvements do not qualify for the Section 179 deduction. Per page 17 of Pub. 946, "Land and land improvements do not qualify as section 179 property. Land improvements include swimming pools, paved parking areas, wharves, docks, bridges, and fences".
The portion of Pub 946that you referenced, "Generally, you cannot claim a section179 deduction if you lease the property to someone else." only applies to property you purchase in order to lease that same property to someone else (for example, if you buy a tractor for the purpose of leasing it to the cattle farmer, that tractor is not eligible for the Section 179 deduction).
The 100% bonus depreciation rules are much more flexible.
The Tax Cuts and Jobs Act, signed into law in late 2017, allows businesses to immediately deduct 100% of the cost of eligible property in the year it is placed in service (it was formerly limited to 50% of eligible property).
To qualify as eligible property, the property must be one of the following:
- MACRS property that has a recovery period of 20 years or less;
- computer software as defined in, and depreciated under, section 167(f)(1);
- water utility property as defined in section 168(e)(5) and depreciated under section 168;
- a qualified film or television production as defined in section 181(d) and for which a deduction would have been allowable under section 181 without regard to section 181(a)(2) and (g) or section 168(k);
- a qualified live theatrical production as defined in section 181(e) and for which a deduction would have been allowable under section 181 without regard to section 181(a)(2) and (g) or section 168(k); or
- a specified plant as defined in section 168(k)(5)(B) and for which the taxpayer has madean election to apply section 168(k)(5).
As the fence is MACRS property with a recovery periodof less than 20 years, it would qualify for 100% bonus depreciation.
More information regarding what property qualifies for bonus depreciation can be found athttps://www.irs.gov/pub/irs-drop/td-9874.pdf.
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