Sale of Rental

[GraceNY]

I have spent a considerable amount of time searching for an answer on this.  I don't see anything on it.  Just taking original basis and adding selling expenses (i.e. title, commissions, etc.)

New client.  Started renting out a house in 7/2010.  Not his primary residence prior to that just a 2nd home.  Took it out of service in 5/2019.  Between 5/2019 until date of sale in 10/2020, he spent a considerable amount of money getting the property in shape for the sale.  I would like to know if the if those expenses can be added to the basis.  And, if so, would it just be "capital improvements" not fixing up expenses like painting.

Thank you in advance for any input.

Grace

[jklcpa]

Only those costs that would be considered a capital improvement can be added to the basis of this investment property.  Other expenditures that are of the nature of repairs, maintenance, or fixing up aren't deductible and are not additions to basis.   

[Pacun]

Why did he take it out of the market?  What was the intent when he purchased that second home? Prior to 7/2010, did he own the home? Why didn't he continue to rent it after he fixed it?

[Lee B]

38 minutes ago, GraceNY said:

 

. . .   Between 5/2019 until date of sale in 10/2020, he spent a considerable amount of money getting the property in shape for the sale.  I would like to know if the if those expenses can be added to the basis. . . . 

 

If the expenditures that were not capital improvements were done with the intent of preparing the property to be sold, wouldn't those expenses be deductible

as additional sales related expenses i.e. painting and etc. ?

[jklcpa]

Anything related to normal maintenance or repair type items, to fix or maintain its condition, haven't been deductible or included in selling expenses since the Tax Relief Act of 1997.