Here's another possible twist on my builder's remodel of the rental portion of his duplex. This guy hasn't filed a timely return in years, so he has never had a chance to elect to capitalize the carrying costs on the property being remodeled, i.e. taxes, interest, insurance. His income is so low that he doesn't benefit from any current Schedule A deductions. However, he might benefit from a disallowed investment interest deduction that could be carried forward until it could be used at the time of sale. If the property were still being rented, he could deduct half the acquisition debt interest on Schedule E. Can he consider this interest during the remodel period to be investment interest and report it as such? Or is this being a little too clever?
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Evan Appelman, EA -
Never had a chance? Didn't he have a chance to file timely returns in any of those prior years?This guy hasn't filed a timely return in years, so he has never had a chance to elect to capitalize the carrying costs...Roland Slugg
"I do what I can." -
Read "Never gave himself a chance!
Does that sound better? One unique feature of this business is the opportunity to deal with people who do such abysmally stupid things!
Originally posted by Roland Slugg View PostEvan Appelman, EAComment
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if his intent is to rent then the remodeling expenses are deductible on Sch E. As for prior problems, all should be brought up to date by filing of prior returns.Believe nothing you have not personally researched and verified.Comment
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