Tax loss 2004 rental property - Posted by Tony S

Posted by dealmaker on March 15, 2005 at 22:52:18:

My CPA is very conservative and he always make me capitalize anything major, carpeting, foundation, new appliances would pretty much fill that bill. Painting, repairing the tubs, plumbing repairs are probably all expense items.

AFAIK the rent amount of ZERO doesn’t affect it’s status as a rental ppty.


Tax loss 2004 rental property - Posted by Tony S

Posted by Tony S on March 15, 2005 at 22:28:28:

I purchased a rental property during 4th quarter 2004. Made major repairs: new carpet, painting, appliances, and resurfaced bathtubs and counters $7K, plus plumping and foundation work of $8k. There was the normal holding cost such as mortgage interest and utiliies. I did not get a tenant (rental income) until January 2005. Can I take the total repair cost as a loss against my earned income? Or should it be added as additional cost basis.

Re: Tax loss 2004 rental property - Posted by Jimmy

Posted by Jimmy on March 16, 2005 at 09:15:31:

There are two important questions embedded in your facts.

  1. When was the property “placed in service?” In other words, when was it available for a tenant to move in? If it was ready on or before 12/31/04, then you can take some deductions for depreciation, repairs, etc, which OCCURRED after the in-service date. The money you laid out before this date will need to capitalized, and added to basis. This includes construction period utilities. Two exceptions: interest expense and property taxes can be deducted.

  2. For money you shelled out AFTER the in-service date, you will need to determine which are expensable and which are capitalized. Most of the items you describe are definitely CAPITAL in nature, and should be added to basis, and depreciated over the appropriate period.