Llc

[S T]

Client forms an LLC - purchases a Commerical Warehouse in 2008
Is renovating and building out for Artist's Studios to lease.

As of 12/31/09 the renovation and build out is not complete. Client has already acquired (probably not signed) 7 pre-leases for occupancy.

Do all costs of the renovation and build out add to basis as Improvements, until such time as the First Unit is actually leased and lease payments received?

Sandy

[Gretel]

Client forms an LLC - purchases a Commerical Warehouse in 2008
Is renovating and building out for Artist's Studios to lease.

As of 12/31/09 the renovation and build out is not complete. Client has already acquired (probably not signed) 7 pre-leases for occupancy.

Do all costs of the renovation and build out add to basis as Improvements, until such time as the First Unit is actually leased and lease payments received?

Sandy

I would think at the time the improvements are completed and units are available for rent is the time to start taking rental expenses, not matter if income is received.

The question is if one or two apartments are already available or if all apartments are only available after the improvements are completed.

[S T]

Redy for Rents

So far nothing is ready! - Still have some electrical and a few items for completion

So my thought was "NOT AVAILABLE" for rent - no deduction, all expenses for the Rehab are capitalized - until such time as they move at least "one" tenant in.
And depreciation does not commence until such time as the Bldg is available (even if only one unit)

Sandy

[Gretel]

Yep, yep, yep. I agree.

[ChEAr$]

Except for property taxes paid and maybe accountants fees.

[S T]

Good point

No income, however, could I deduct operating expenses such as

bank charges,
property taxes,
accounting fees
legal fees - questionable
office supplies
postage
printing
telephone

Insurance - would that qualify as a deduction
utilities - would that qualify as a deduction

All other costs relating to renovation would be capital improvements and depreciation commences when the first lease is written and the bldg is occupied?

Thanks,

Sandy

[ChEAr$]

No income, however, could I deduct operating expenses such as

bank charges,
property taxes,
accounting fees
legal fees - questionable
office supplies
postage
printing
telephone

Insurance - would that qualify as a deduction
utilities - would that qualify as a deduction

All other costs relating to renovation would be capital improvements and depreciation commences when the first lease is written and the bldg is occupied?

Thanks,

Sandy

Any costs directly attributable to the properties (except taxes) add to basis. Perhaps
legal work might be in such a connection; depends. Insurance on what? Certainly not on the properties UNLESS title insurance which is then capitlized.
Utilities for office, yes; utilities to the properties; capitalized.

And here I was hoping I could wind up this LLC client this year, but it hasn't sold the remaining two properties! Oh well, another year's fee next time! (grin