Vacant land held for investment purposes

[leerobea]

My client purchased a piece of vacant land several years ago and now wants to sell it. He asked me if the property taxes he paid over the years can be added to basis.. I found one source that said the property taxes on investments should be deducted annually as an investment expense. Anybody out there who can help me?

Thank you,
leerobea

[dsi]

You are correct, your client is not.

[solomon]

My client purchased a piece of vacant land several years ago and now wants to sell it. He asked me if the property taxes he paid over the years can be added to basis.. I found one source that said the property taxes on investments should be deducted annually as an investment expense. Anybody out there who can help me?

Thank you,
leerobea

Had the taxpayer made an annual election under §1.266-1, the taxes could have been capitalized annually - but not now. Nevertheless, if these were not deducted, there still might be a chance for a late election. As I recall, it is in §301.9100-3.

[newbie]

Same topic.....different question

Taxpayer has vacant land but did not file a tax return for several years, pretty much just social security so under filing requirements, w/the one exception to receive the stimulus. Because the addition of property taxes to basis is an election is he SOL for each on the nonfiling years?

He has another piece of land he wants to sell in the future, should he file just to make this election to add property tax to basis?

[solomon]

Taxpayer has vacant land but did not file a tax return for several years, pretty much just social security so under filing requirements, w/the one exception to receive the stimulus. Because the addition of property taxes to basis is an election is he SOL for each on the nonfiling years?

He has another piece of land he wants to sell in the future, should he file just to make this election to add property tax to basis?

See the following PLR regarding late §266 elections.

http://www.irs.gov/pub/irs-wd/0629024.pdf

For the years of non-filing, if it meets any of the criteria in §301.9100-3 then approval probably will be granted as the government interest should not be prejudiced.

If approval is granted for the non-filing years, then an annual election under §1.266-1 would be required thereafter. In other words, the taxpayer would have knowledge and hindsight would not be acceptable.

[JG EA]

Queston: Doesn't a letter ruling cost $625? And wouldn't one be required? I mean you just can't take this addition to basis without having made the election can you? So, the taxes would have had to be substantial - I guess at least $4166 which would entirely be possible - to benefit. And assuming that the TP doesn't get the zero CG rate.

[solomon]

Queston: Doesn't a letter ruling cost $625? And wouldn't one be required? I mean you just can't take this addition to basis without having made the election can you? So, the taxes would have had to be substantial - I guess at least $4166 which would entirely be possible - to benefit. And assuming that the TP doesn't get the zero CG rate.

Per §301-9100-3, a request for a letter ruling would be required with the appropriate information in the regulation contained therein. Not sure on the fee, but yes, one would have to consider if the benefit out weighed the fee.