Fix Up Expenses

[Kram BergGold]

Residential Real Estate was held in an Irrevocable Trust and was rented through 2008. 2009-2012 it was not rented (the condominium rules prohibited renting starting in 2009). In 2012 the real estate was sold and before the sale $5,000 of non capital improvements were made like cleaning, painting, etc. Is there any way to count these as an expense? To me, they are not rental expenses, they are not capital improvements, and I don't think they meet a definition of sales expense.

[Burke]

Sounds like sales expense to me. That's what "fixin up" expenses usually are -- to sell the property for the best price. Use in computation of cap gain/loss.

[Kram BergGold]

After Giving it Some Thought

I think the expenses for painting and cleaning are investment expenses. Once the property stopped being rented it became an investment. So the expenses to maintain it are Miscellaneous subjet to 2%.

[FEDUKE404]

Maybe not

I think the expenses for painting and cleaning are investment expenses. Once the property stopped being rented it became an investment. So the expenses to maintain it are Miscellaneous subjet to 2%.

That seems like a real stretch. If you were to go that route, then you could also claim several years worth of insurance, utilities, HOA dues, and whatever as a "miscellaneous investment expense."

I would lean more to capital improvements ($5k for "repairs" seems excessive).

I'm unsure what the time-restriction rules might be for "fixing up expenses" (therefore cost of sale) in this scenario, but it might be worthwhile to see if that is a viable option.

It might clear up things a bit to know the relationship of the owner(s) to the irrevocable trust you mentioned.

Good luck!

FE

[Gary2]

That seems like a real stretch. If you were to go that route, then you could also claim several years worth of insurance, utilities, HOA dues, and whatever as a "miscellaneous investment expense."

I would lean more to capital improvements ($5k for "repairs" seems excessive).

While some repairs may be properly classified as capital improvements, I don't see why others such as insurance, local assessments, HOA dues, etc. wouldn't qualify as investment expenses.

There are only a few possibilities for classifying real estate into a tax use category: rental, business, investment, or personal (any others?). Unless the trust allowed the beneficiaries to use the property for personal purposes, I don't see how this could be anything but investment use once the condo association forbade rentals.

[taxea]

I agree with Burke...expense of sale