RENTAL EXPENSES while NOT rented out

[nwtaxlady]

Client has a rental out of state. Got a violation of code notice February 2nd, 2015 and flew there to address the situation and evicted the tenants..
Had to do many repairs and at the same time just spent lots of time & money on the property. New roof, new HVAC, new floors, new paint, new appliances, new hot water heater, etc.

1st question: No rent received in 2014 and was not rented out until 2016. So since not in service then do these improvements start depreciation in 2016?


What about Utilities for the year paid on it? Add to basis into the Improvements?

They flew there to address the issues. So travel expenses? They have airfare, rental car, gas for car and food. They were there for a total of 3 months and their food was $1463. Question... can and where do you deduct these expenses on E or on Sch A as investment expense? Can they deduct their food?

Thanks for any and all help!!

[ATSMAN]

Client has a rental out of state. Got a violation of code notice February 2nd, 2015 and flew there to address the situation and evicted the tenants..
Had to do many repairs and at the same time just spent lots of time & money on the property. New roof, new HVAC, new floors, new paint, new appliances, new hot water heater, etc.

1st question: No rent received in 2014 and was not rented out until 2016. So since not in service then do these improvements start depreciation in 2016?


What about Utilities for the year paid on it? Add to basis into the Improvements?

They flew there to address the issues. So travel expenses? They have airfare, rental car, gas for car and food. They were there for a total of 3 months and their food was $1463. Question... can and where do you deduct these expenses on E or on Sch A as investment expense? Can they deduct their food?

Thanks for any and all help!!

I had a client with similar issue except travel. Fire/Building dept. issued a code violation after tenants complained and their property was banned from habitation till violations were resolved. It was vacant almost a year because landlord had difficulty with financing.

I would be very cautious with travel, lodging and food expenses for 3 months. It may raise a red flag. Fortunately I only had to deal with a few hundred miles for local travel.

The improvements needed to fix violations were depreciated as improvements the year it was rented out.

The only utilities involved was minimal for water/sewer and electric while repairs were going on. I added all that to repair cost.

[taxea]

since the code required it I would say it was ordinary and necessary to continue it as a rental. I agree with ATSMAN

[Roland Slugg]

Most of the items you specifically listed are depreciable assets, so use a "placed in service" date of some time in 2016 when the place was available for rent. All the other expenses to fix everything are deductible as repairs, and I would include the painting in that category, too. I would also deduct the travel expenses ... air fare, car rental and gas, hotels and 50% of all the meals. If the repairs started in 2015 and continued into 2016, deduct the expenses in the years in which they were paid.

[AZ-Tax]

50% of food?

Most of the items you specifically listed are depreciable assets, so use a "placed in service" date of some time in 2016 when the place was available for rent. All the other expenses to fix everything are deductible as repairs, and I would include the painting in that category, too. I would also deduct the travel expenses ... air fare, car rental and gas, hotels and 50% of all the meals. If the repairs started in 2015 and continued into 2016, deduct the expenses in the years in which they were paid.

If the food was entirely for the Landlord, not a property manager, a hire contractor, laborer etc.....the Landlord has to eat so I guess why should his or her meals be rental related expense? Maybe I am missing a deduction. My Clients/Landlord make several trips to see their rental, Home Depot etc. If they stop for a coffee, soda, Whopper, etc., to and/or from trip to Home Depot, Rental, 50% of that is deductible?

[ATSMAN]

If the food was entirely for the Landlord, not a property manager, a hire contractor, laborer etc.....the Landlord has to eat so I guess why should his or her meals be rental related expense? Maybe I am missing a deduction. My Clients/Landlord make several trips to see their rental, Home Depot etc. If they stop for a coffee, soda, Whopper, etc., to and/or from trip to Home Depot, Rental, 50% of that is deductible?

My concern is deducting food for 3 months at any rate. It may raise a red flag. Most of my out of state landlords visit their property (in sunny FL) once or twice a year and the expenses deducted are airfare, lodging, car rental. The visits lasts less than a week.

[dkss]

Taxbook page 8-11

see the tax book pg 8-11

Travel for investment purposes. Travel expenses, including
meals, are deductible if in connection with investment and other
income-producing property.

[JMO]

Expensed vs. Capitalized

No rent received in 2014 and was not rented out until 2016. So since not in service then do these improvements start depreciation in 2016?

-- YES, you would place the improvements with an in-service date for when the apartment was available for rent.

What about Utilities for the year paid on it? Add to basis into the Improvements?

-- Any costs incurred during the non-rented portion would be expensed.

They flew there to address the issues. So travel expenses? They have airfare, rental car, gas for car and food. They were there for a total of 3 months and their food was $1463. Question... can and where do you deduct these expenses on E or on Sch A as investment expense?

-- Travel costs (airfare, rental, gas), these expenses would be included in the overall improvement on Sch E. I did not see in your post whether or not the taxpayer filed a Change in Accounting Method to comply with the new Tangible Property Regulations. Repairs vs Capitalization of expense depends on the application of these regulations. Also, if the taxpayer incurred all of these expenses to bring the property back to a rentable state, then these expenses would be considered one event and not expensed (absent the separate unit of property of HVAC, hot water tank, appliances, etc).

Can they deduct their food?

-- In regard to meals spanning 3 months, you would need to determine if it would be reasonable to deduct the vast majority of these meals for such a long period of time (your client would need to eat three square meals a day whether he was at that rental property or sitting at home and conducting business).

Hope this info helps.

[nwtaxlady]

Yes, thank you jmailoffers.

Thank you for addressing every point. I agree, everyone has to eat anyways so didn't take the meals.

[ATSMAN]

Thank you for addressing every point. I agree, everyone has to eat anyways so didn't take the meals.

You may notice that clients get a much better/expensive meal to eat when they can expect to deduct those expenses. I am amazed at how many surf and turf meals are consumed on a daily/weekly basis when it is a business deduction.