Inherited house- deductible expenses?

[taxitc]

Taxpayer inherited her sisters house in late 2009. Worth about $1.5 M. It was listed for sale
soon after.The taxes and monthly upkeep are terrible. She never lived in it. The house is in Maine and she lives in Ks. The taxes are $19,000/ year. The monthly upkeep ranges from
4K to 9K. Are the upkeep/maint. expense deductible? I consider it investment property.
NOT residential personal. Thoughts?.

[taxea]

it is a second home, unless rented, only property tax and mortgage interest are deductible.
Investment property usually is held for profit. The mere fact that it is for sale doesn't necessarily make it investment property.

[oceanlovin'ea]

I think inherited property is usually considered investment property if the one inheriting it doesn't plan to ever live in it.
Maybe monthly expenses for upkeep could be added to basis in house??

Linda, EA

[ChEAr$]

I think inherited property is usually considered investment property if the one inheriting it doesn't plan to ever live in it.
Maybe monthly expenses for upkeep could be added to basis in house??

Linda, EA

Right. As of the moment devisee inherits the house, i.e. date of death, it is investment property.
However, after that one point in time the owner may then designate it as second residence and deduct usual interest and taxes, but then forgoing any possibility of deducting a loss on it later if sold.

[Gretel]

Right. As of the moment devisee inherits the house, i.e. date of death, it is investment property.
However, after that one point in time the owner may then designate it as second residence and deduct usual interest and taxes, but then forgoing any possibility of deducting a loss on it later if sold.

I agree with this other than the taxes. For taxes you always have the choice to deduct or add to basis for investment property. At least this is what I believe.

[JohnH]

So if the inherited property is held from day one as investment property (listed & advertised for sale for an extended period of time although there are no buyers due to the current economy), then does taking a current deduction for property taxes and interest invalidate the "investment" intent?

What if there is no loan, and the only deduction taken is for property taxes? could the heir take a current deduction for property taxes, accrue all the maintenance expenses, and add them to basis when the property is sold?

[taxitc]

Thanks to everyone who has replied. Good thoughts. Still not sure????

[ddoshan]

A home potentially worth that much I would hope the sister got a valid appraisal at the time rather than some ballpark figure.
I believe that to capitalize property taxes you have to make an appropriate election each year to that affect.

[taxitc]

So if the inherited property is held from day one as investment property (listed & advertised for sale for an extended period of time although there are no buyers due to the current economy), then does taking a current deduction for property taxes and interest invalidate the "investment" intent?

What if there is no loan, and the only deduction taken is for property taxes? could the heir take a current deduction for property taxes, accrue all the maintenance expenses, and add them to basis when the property is sold?

IF she inherited a "building", would the upkeep and maint. be deductible. The property must be maintained so it would not depreciate in value. It seems the only question is--
Is it a period expense or a capital expenditure? Can or should you capitalize the cost to clean the snow off the driveway (Very-very long driveway to the property) to allow the fire department to get there to put out a fire. Do you let the grass grow (Very-very large area).
waist deep? On and On. Pipes freeze in the winter.

[Gretel]

If there is no income from investment there is no way to take expenses no matter how much and how plausible it seems to you.

Only exception I know of are taxes.

[Burke]

What if there is no loan, and the only deduction taken is for property taxes? could the heir take a current deduction for property taxes, accrue all the maintenance expenses, and add them to basis when the property is sold?

Yes. I have a client who is doing this as house has remained on the market but as yet is unsold.

[taxitc]

More info. I "took" the RE taxes in 2009 & 2010 and will again this year. No loan on house.
The house was appraised and included in the estate tax return. If the house is sold, I believe that value is used to compute gain OR LOSS. Correct? I am pretty sure it won't sell
for the Estate amount. ????? Then wouldn't mind capitalizing the maint. Thoughts??

[taxea]

IF she inherited a "building", would the upkeep and maint. be deductible. The property must be maintained so it would not depreciate in value. It seems the only question is--
Is it a period expense or a capital expenditure? Can or should you capitalize the cost to clean the snow off the driveway (Very-very long driveway to the property) to allow the fire department to get there to put out a fire. Do you let the grass grow (Very-very large area).
waist deep? On and On. Pipes freeze in the winter.

Expenses to maintain the property are added to the basis. You would have to check the rules to determine if any of the expense are not eligible as an increase of basis.