investment expenses on land held for investment
Can a person deduct lawn maintenance for land held for investment? The land will not generate income till sold.
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d9JGcUv-ur4izzacwZ5xHE
03/26/11 1:16pm PDT
Viewed by asker 04/13/11 9:22pm PDT
Viewed by asker 04/13/11 9:22pm PDT
12 Replies
03/26/11 1:36pm PDT
Best Answer - Chosen by the Community
Since it's not a major improvement to the investment property, it shouldn't be added to basis. Minor repairs and maintenance are expenses/ deductions. And investment expense should be taken on Sch A, Misc. Deductions.
essjay
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03/26/11 3:35pm PDT
I do not recall a reg that says only major improvements cab be added to basis. Only major improvements should be depreciated...but that is different.
I would be greatful for a cite on that ruling.
"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that rnethod which best pays the treasury..." Judge Learned Hand - U S Court of Appeals
03/26/11 3:48pm PDT
I don't have the reg, but it's in Pub 550, under Basis of Investment Property/ Adjusted Basis
Grafton
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essjay
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03/26/11 8:23pm PDT
Colibri, I believe that this is what you are talking about, however this is the case only if you can deduct these as current expenses...which you cannot if it is just a vacant piece of land.
excerpt:
Deducting vs. Capitalizing Costs
Do not add to your basis costs you can deduct as current expenses. For example, amounts paid for incidental repairs or maintenance that are deductible as business expenses cannot be added to basis. However, you can choose either to deduct or to capitalize certain other costs. If you capitalize these costs, include them in your basis. If you deduct them, do not include them in your basis. (See Uniform Capitalization Rules,
This is why I think that these can be added to the basis
"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that rnethod which best pays the treasury..." Judge Learned Hand - U S Court of Appeals
03/27/11 6:30am PDT
I do not think placing $2.00 of gas in the lawnmower to cut the grass would be added to the basis
03/27/11 6:39am PDT
The issue seems to fall on this: Can I take a Sch A. Misc deduction for the maintenance costs of raw land as investment expenses? Grass cutting, weeding. The property itself is not income producing in 2010 , but will be upon its sale in the future.
03/27/11 6:56am PDT
$ 2.00 in gas is one thing, but hiring a landscaper to mow every other week can add up, and I do not believe that there is such an issue. In all my years I have never heard of , read, or otherwise brushed up against a Sched A deduction for lawn mowing.I have, however, capitalized these types of deductions for the subsequent sale per the excerpted citation shown.
03/27/11 8:10am PDT
But that same excerpt refers you to the cite Grafton listed in pub 551 which tells you what to capitalize and what to expense.
It says there to increase basis "by all items properly added to a capital account. These include the cost of any improvements having a useful life of more than 1 year."
There's the guideline. Some companies, of course, set a $ threshold on what to expense and what to capitalize. So, I'd say, use your best judgment.
But if it can't be capitalized, it's an investment expense. Sch A, Misc Deductions. See: http://www.irs.gov/publication...
03/27/11 9:37am PDT
So we agree that the $2.00 in gas would be Sch A!!!!!!!!!!!!!!!!!!
Good analogy and cite that you & Grafton referred to colibri
essjay
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03/27/11 10:32am PDT
My cite was from Pub 551, but the new cite is good and I can get behind that, of course, so long as the 2% threshold doesn't knock it off...then I would be back to the cite that does say you can capitalize because if the 2% nullifies the deduction then you, in effect "can't deduct as current expenses"
"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that rnethod which best pays the treasury..." Judge Learned Hand - U S Court of Appeals
03/27/11 1:29pm PDT
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Now for THAT (to change the 2% limit) you'd have to talk to Congress. ;-)
