sale of rental

[Super Mom]

I have a client that rents a house and has rental income for 2015. She made substantial improvements to it at the end of 2015 (like around 10,000 worth). She wants to not include that until 2016 when she sells the house and decreases it from basis. I'm thinking those improvements must be capitalized this year and depreciated as allowed or those expenses will be lost. Then the undepreciated portion can come off of basis when the house is sold hopefully in 2016. Correct?

I found that carrying charges like the 2015 taxes can be part of the basis subtraction if not expensed, but thinking this other must be depreciated or lost.

[Gretel]

If end of 2015 means November or December, you are talking about 2 months of depreciation for 2015. Maybe the improvements were not finished until early 2016? It does go by when they were paid for but when they were put into service.

[New York Enrolled Agent]

I found that carrying charges like the 2015 taxes can be part of the basis subtraction if not expensed, but ...

Are you sure about that? On a rental house in active use? I stand to be corrected but I don't think §266 is applicable in your scenario.