Property Insurance while Vacant

[equinecpa]

Client is just sitting on a former rental for future development/sale. We are currently capitalizing property taxes and interest. What about property insurance,should this be capitalized? Can it be expensed?

[Gretel]

I capitalized any expenses in situation like this. Requires election attached to the tax return.

[ATSMAN]

Certainly doesn't sound as if the property is "available for rent" at this time.

That is the key factor that I constantly remind my landlord clients when they take a property off the market for various reasons. I had one fellow hold on to a vacant rental property for 5 years hoping to sell it at a gain because a Casino property was being developed in that area.

[Gretel]

Just curious: Let's assume same overall circumstances except the building was NEVER rented and is being held for sale at an opportune time.
Would you also capitalize things like yard maintenance, simple repairs/upkeep/cleaning, utilities, HOA dues, etc. ??

Yes, I certainly would. I have done some research on this issue some time back. In the case of never being rented is part of the inventory costs. If you have land only there are some fine lines between having to capitalize by default or having to make an election to capitalize.

[New York Enrolled Agent]

A second home ( i.e. a personal residence) would not qualify. See Megibow 21 TC 197