Real estate taxes added to basis

[Gretel]

I have searched the message board and tax book plus other sources. Now I am turning to my trusted backup.

I know that you can elect to add real estate taxes paid to the basis of investment property. I tried to find what exactly I need to do. Formal election in first year, year by year election or what?

I also was wondering about this: This is a gas station, out of business since almost 2 years, is on market for sale. I assume it automatically converted to investment property after business was closed, right?

[JG EA]

Part 1 of your question

Pub 535: Carrying Charges
"Carrying charges include the taxes and interest you pay to carry or develop real property or to carry, transport, or install personal property. Certain carrying charges must be capitalized under the uniform capitalization rules. (For information on capitalization of interest, see chapter 4.) You can elect to capitalize carrying charges not subject to the uniform capitalization rules, but only if they are otherwise deductible.

You can elect to capitalize carrying charges separately for each project you have and for each type of carrying charge. For unimproved and unproductive real property, your election is good for only 1 year. You must decide whether to capitalize carrying charges each year the property remains unimproved and unproductive. For other real property, your election to capitalize carrying charges remains in effect until construction or development is completed. For personal property, your election is effective until the date you install or first use it, whichever is later.

How to make the election. To make the election to capitalize a carrying charge, write a statement saying which charges you elect to capitalize. Attach it to your original tax return for the year the election is to be effective. However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Attach the statement to the amended return and write “Filed pursuant to section 301.9100-2” on the statement. File the amended return at the same address you filed the original return"