Client inherited parents’ home which needs work before it can be sold to anyone that will need to finance the purchase. New Septic, well, foundation fix up, and other repairs. They did obtain an appraisal as is and these costs will add to the basis of the property as well as the property taxes if the proper election is made. My question, can the mileage to meet with subcontractors, gather bids and do actual repairs themselves, if logged, be expensed or added to the basis?
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these are cost of sale items (fix-up)Believe nothing you have not personally researched and verified. -
Please feel free to elaborate...
Which are cost of sale items (fix-up)?Originally posted by taxea View Post
The new Septic, well, foundation fix up?
Or the mileage?
Or both?Comment
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Found this in Pub 527:
Travel expenses. You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. You must properly allocate your expenses between rental and nonrental activities. You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. The cost of improvements is recovered by taking depreciation.
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At this point the intention is only to sell - really does not want to deal with tenants, but in theory would probably be similar. If the primary purpose of traveling is to improve the property you cannot deduct as an expense, so can the cost of traveling be "capitalized" and added to the basis?Comment
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The mileage should be an expense of the estate. Is there one? Can be reimbursed from that. If there is no money, this expense can be reimbursed to executor from the proceeds at sale before distribution to heirs. The major improvements will add to basis of house. Upkeep is an expense of the estate.Last edited by Burke; 03-03-2013, 11:11 AM.Comment
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The deed was written as Transfer On Death - so house transferred at death and there was nothing else of value - dumpster is being filled & it's off to the landfill.Comment
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Inherited house
AN inherited house which has not in the interim been used for personal purposes, nor converted into a rental property, is a capital asset. All expenses, including mileage to Home Depot, etc may be added to the basis of the capital asset, so that gain is lessened when sold.ChEAr$,
Harlan Lunsford, EA n LAComment
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Since we're on this topic, what about the cost of telephone service at the inherited property during the "make ready for sale" period? I'm thinking of a situation in which the inherited residence is completely unoccupied (empty of furnishings, etc) and the sole purpose of the telephone service is to facilitate remote notification for the burglar alarm system. Same question about utilities to maintain a stable temperature to protect the interior of the residence and water to be available for workers hired to do fix-up and improvements to the property. Not a hypothetical - I'm dealing with that issue on a return right now, and the OP might be interested in hearing the response as well."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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Since the telephone is required for the burglar alarm system, it -- as well as the necessary utilities -- (no TV, cable, etc) are considered necessary costs of the estate to maintain the property until it can be sold. They are deductible.Comment
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Most Ins. Companies won't write a policy if there are no utilities on at the property.You have the right to remain silent. Anything you say will be misquoted, then used against you.Comment
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all replacement and repairs, I have to check on the mileage I don't remember.Originally posted by DexEA View PostBelieve nothing you have not personally researched and verified.Comment
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1st phone in any residence is not deductible. Utilities are because the power and water have to be on for the work to be done.Originally posted by JohnH View Post
Let me clarify my response on what is fix-up and what isn't. What normally would be repairs or maintenance goes into fix-up. Normal capital costs, items that would increase the FMV of the property can be added to the sales price which increases what the property would have sold for without them being done. Here is the Pub info
Believe nothing you have not personally researched and verified.Comment
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[QUOTE=taxea;150068]1st phone in any residence is not deductible. Utilities are because the power and water have to be on for the work to be done.
/QUOTE]
Not pertinent to this issue. A telephone in this house does not fall under section 162 to which the 1st non deductible phone line applies.
The additions to basis are permitted under an altogether different section of the IRC.,ChEAr$,
Harlan Lunsford, EA n LAComment
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