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Old 03-31-2014, 01:38 AM
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Cost basis for investment property

We purchased an investment property (vacant duplex) in June 2013. We made significant improvements to the property and sold it in December 2013. It was never offered for rent, so as I understand it, it's not a rental property for tax purposes.

I'm confused about how to calculate our cost basis. Most of the $$ spent on the renovation are capital improvements (new windows, new plumbing, upgraded electrical supply), which I understand go straight to our basis. However, how do we treat operating expenses such as mortgage interest, insurance, utilities, and maintenance and repairs? It doesn't seem right that these would go to increase our cost basis, but if not, how do we capture them as investment-related expenses?



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Old 04-01-2014, 12:49 AM
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Originally Posted by berkeley_retreats View Post
We purchased an investment property (vacant duplex) in June 2013. We made significant improvements to the property and sold it in December 2013. It was never offered for rent, so as I understand it, it's not a rental property for tax purposes.

I'm confused about how to calculate our cost basis. Most of the $$ spent on the renovation are capital improvements (new windows, new plumbing, upgraded electrical supply), which I understand go straight to our basis. However, how do we treat operating expenses such as mortgage interest, insurance, utilities, and maintenance and repairs? It doesn't seem right that these would go to increase our cost basis, but if not, how do we capture them as investment-related expenses?
I'm confused about how to calculate our cost basis. Most of the $$ spent on the renovation are capital improvements (new windows, new plumbing, upgraded electrical supply), which I understand go straight to our basis.=====>correct;I guess you need adj basis for calculation of your short term capital gain, ordinary gain.
However, how do we treat operating expenses such as mortgage interest, insurance, utilities, and maintenance and repairs? ======>>>>>>>>>>>>As you never offered for rent, you do not need to file Sch E of 1040 and can’t deduct utilities/maint/ r reapirs;however, You can deduct home mortgage interest if you file Form 1040 and itemize deductions on Sch A of Form 1040.The mortgage is a secured debt on a qualified home in which you have an ownership interest. So unless you itemize deductions, you can’t claim mortr int exp on your return.


It doesn't seem right that these would go to increase our cost basis, but if not, how do we capture them as investment-related expenses?=========>>>>>>>>>>>as mentioned aboce as it was never offered to be rented you did not need to depreciate the home so you do not need to recapture sec 1250 exp either.On investment pty, you can write off your mortgage interest, property taxes and mortgage insurance;on Sch A of 1040



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Old 01-14-2015, 12:29 AM
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It doesn't seem right that these would go to increase our cost basis, but if not, how do we capture them as investment-related expenses.



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