Hello All,
I hope everyone is staying sane these days. I have a client that has posed the following question to me and I am stumped.
When we purchased each of our rental properties, we hired a company to help us through any and all aspects of purchasing the property, fixing it up, and renting it out. The services rendered included market research, property inspection, initial feasibility analysis, estimations of purchase cost, oversight of transactions facilitated by local professionals, estimation of construction costs, engage and oversee local contractors and subcontractors, advertise the property, screen potential tenants, oversight of all negotiations not requiring licensure, and other reasonable duties necessary to complete the business of the purchaser. The business of the purchaser was to buy, fix, and rent it out. This particular fee only covered services up until a tenant moved in. The fee was a percentage based, in part, on the market value of the property upon completion of the initial renovation and came to around $10,000. So the question is, do I include this amount in the renovation costs and depreciate it over a period of 27.5 years, or would this expense be entered as a professional fee and deducted all in the current year ?
----My thought is to treat these costs as capital expenditures, especially since the fees are incurred before a tenant moves in; depreciate over 27.5 years.
TIA and try to remember to breathe every now and then!
I hope everyone is staying sane these days. I have a client that has posed the following question to me and I am stumped.
When we purchased each of our rental properties, we hired a company to help us through any and all aspects of purchasing the property, fixing it up, and renting it out. The services rendered included market research, property inspection, initial feasibility analysis, estimations of purchase cost, oversight of transactions facilitated by local professionals, estimation of construction costs, engage and oversee local contractors and subcontractors, advertise the property, screen potential tenants, oversight of all negotiations not requiring licensure, and other reasonable duties necessary to complete the business of the purchaser. The business of the purchaser was to buy, fix, and rent it out. This particular fee only covered services up until a tenant moved in. The fee was a percentage based, in part, on the market value of the property upon completion of the initial renovation and came to around $10,000. So the question is, do I include this amount in the renovation costs and depreciate it over a period of 27.5 years, or would this expense be entered as a professional fee and deducted all in the current year ?
----My thought is to treat these costs as capital expenditures, especially since the fees are incurred before a tenant moves in; depreciate over 27.5 years.
TIA and try to remember to breathe every now and then!
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