Sch D, Basis plus real estate taxes

[Sherill]

Two fold question - Property acquired by purchase 30 years ago. If real estate taxes were paid by the seller (for 30 years), do you add to the basis, 30 yrs of taxes or just the last year?
Second part question - Seller had to remove an old unliveable trailer (cost $3000), b/4 buyer would accept agreement. Could this be considered an improvement to land, lasting over one year, thereby added to the basis, also?
Thanx

[Bucky]

Two fold question - Property acquired by purchase 30 years ago. If real estate taxes were paid by the seller (for 30 years), do you add to the basis, 30 yrs of taxes or just the last year?

The property taxes should have been deducted each year unless taxpayer made the election to capitalize 30 years ago. Don't know the code for election off the top of my head. I believe you must make the election each year.

Second part question - Seller had to remove an old unliveable trailer (cost $3000), b/4 buyer would accept agreement. Could this be considered an improvement to land, lasting over one year, thereby added to the basis, also?
Thanx

This would be considered landimprovement and I would add to basis.

[OldJack]

This would be considered land improvement and I would add to basis.

Clearing of land certainly is classified as land improvements added to cost basis, however, I really question if moving a trailer would be considered land improvement as was intended under the IRS code. It would seem to me that this expense is selling expense that reduces the sale price to the amount realized. If the 1099 gross sale price must be reported on the tax return (rather than amount realized), the selling expenses are added in the cost amount column for purpose of determining gain on the form. Tax end result is the same.

If this is investment property where the real estate taxes could not be deducted, then the taxes could be added to basis. If they were deducted before they would not be a part of basis. If these taxes were allowable each year as a deduction I am not sure you can claim them now. However, I really have not checked anywhere for an answer. Someone else on here will probably know.

[BOB W]

Taxes...

He had the right to deduct the taxes each year, did he? If he didn't, and did not make an election to capitalize, he probably lost that deduction.

As to the trailer, it could be considered a selling expense or added to cost basis, either way it reduces gain.


XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
LOOKS LIKE WE POSTED AT THE SAME TIME......