LLC formed to hold/sell property

[equinecpa]

A client of mine (a welder by trade) formed an LLC with other family members this year. The LLC will be filing as a partnership. The LLC purchased a property -house with acreage. The intent is to first fix up house, and sell it, severing off the rest of the property for a couple lots for future development -exactly what (building or selling raw land, not yet determined).

I'm thinking pretty much all costs need to be capitalized while improving the house. To complicate things a bit further the house was rented for one month (deal closed before prior owner was ready to move out). I imagine a months worth of interest, utilities and property taxes can be expensed.

When this house is ready to sell, can the interest be deducted or must it be capitalized until sold? How about the interest on the land?

Thanks all

Carolyn

[solomon]

Interest

on unproductive or unimproved land could be deducted or capitalized under Reg. 1.266-1. I would think the house would be subject to 263A.

[ChEAr$]

To be sure!

on unproductive or unimproved land could be deducted or capitalized under Reg. 1.266-1. I would think the house would be subject to 263A.

capitlized.