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Add work done on rental before sale was finalized to basis of property?

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    Add work done on rental before sale was finalized to basis of property?

    Client purchased a former church parsonage which he is turning into rental property. Due to the fact it was owned by a church, the sale had to be approved by the NY state attorney general's office before being finalized. This took the better part of a year. While waiting, client started renovating in 2018. Sale was finalized in July 2019. Does money spent on renovations before sale was final get added to his basis?

    #2
    I am not sure if there is any exception for Church property but if it was a commercial property, I would capitalize expenses paid before the property is put on rent.
    Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR

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      #3
      My understanding is the same as yours: work done before it is listed for rent should be added to basis.

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        #4
        Expenses prior to putting in service are "startup cost", and you can deduct $5000 as expenses with balance amortized over 15 yrs. there are limits see pub 527

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          #5
          Renovations that should be capitalized/depreciated are not "startup cost" and do not get deducted when rental property is available. They get capitalized and will be part of the depreciable basis when the building is placed in service.

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