Rental Interest Deduction Question

[Mr1040]

My client purchased a residential rental in 8/06 and is preparing it to be able to rent, but not yet ready to rent. In 2006 he had $14,900 in R/E Mtg Int on that unit. Can he deduct that rental interest even though property is not ready to rent or must he capitalize it or add it to the cost of the property to depreciate when it is finally ready to rent. He has two other rentals with a combined loss of $6900 for the year. If he deducts the $14,900 his combined rental loss would still be under $25,000, but not if depreciation was added for the new rental.

[JG EA]

Choices

My client purchased a residential rental in 8/06 and is preparing it to be able to rent, but not yet ready to rent. In 2006 he had $14,900 in R/E Mtg Int on that unit. Can he deduct that rental interest even though property is not ready to rent or must he capitalize it or add it to the cost of the property to depreciate when it is finally ready to rent. .

I think the choices are investment interest or carrying charges (need a statement on the return).

He has two other rentals with a combined loss of $6900 for the year. If he deducts the $14,900 his combined rental loss would still be under $25,000, but not if depreciation was added for the new rental.

It's not a rental until it is rented or at least advertised as a rental.