|
#21
03-17-2005, 03:59 AM
| |||
| |||
 Re: How do I treat interest paid on an investment property? A.G. Kalman wrote: - quote - > Sorry for the delay in responding..... I can't see how you
Reg 1.266-1 clearly defines this as an ANNUAL election. I agree> can make annual elections and still conform to the rules > regarding a change in method of accounting. It seems to me > that if you make the election to capitalize interest expense > for an item, you are stuck with it unless you get the IRS's > permission to change back to expense. that such a formulation is probably unusual. And, who knows whether the Supreme Court would uphold the Reg... <grin MTW << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#20
03-09-2005, 08:44 PM
| |||
| |||
| Re: How do I treat interest paid on an investment property? MTW wrote: - quote - > A.G. Kalman wrote:
Sorry for the delay in responding..... I can't see how you> > What If I had expensed the taxes and/or interest just once > > five years ago? What if only took the standard deduction on > > all tax returns for the last 10 years? > My understanding is that you are supposed to make this > election on an ANNUAL basis, and therefore any such election > is only good for the particular year in question. However, I > would be willing to bet that if you made the election ONCE > and thereafter did NOT deduct any such carrying charges, the > Tax Court might nevertheless allow the accumulation for the > years subsequent to the election (but no guarantees from me > on that). The standard deduction situation is a good > question, and without research I don't have an answer for > that. <grin> Mostly, I was simply responding to David's assertion that > interest could never be capitalized on land not "placed in > service" (if I understood his comment correctly). can make annual elections and still conform to the rules regarding a change in method of accounting. It seems to me that if you make the election to capitalize interest expense for an item, you are stuck with it unless you get the IRS's permission to change back to expense. -- Alan http://taxtopics.net << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#19
02-23-2005, 05:14 AM
| |||
| |||
| Re: How do I treat interest paid on an investment property? "Drew Edmundson" <drewsbeagles[at]hotmail.com> wrote: - quote - > "A.G. Kalman" <glendale202-mtm[at]yahoo.com> wrote:
You interpreted my meaning correctly. Making that election> > MTW wrote: > > > David Woods, EA, ChFC, CLU wrote: > > > > Interest is only capitalized on property not placed > > > > in service, raw land in and of itself never CAN be placed in > > > > service. > > > What about the election available under IRC 266 as more > > > fully explained by Reg. 1.266-1 ??? > > I don't have a problem with making the election. I must > > admit that I am not sure how the election is implemented > > when it is after the fact. Here's the wording: > > > (3) If the taxpayer elects to capitalize an item or items > > under this section, such election shall be exercised by > > filing with the original return for the year for which the > > election is made a statement indicating the item or items > > (whether with respect to the same project or to different > > projects) which the taxpayer elects to treat as chargeable > > to capital account. > > > Does that mean if I make the election in 2004, the year I > > sell land purchased 10 years ago, I can accumulate into cost > > all the property taxes and interest I never expensed? Or > > does it mean I can only accumulate as part of cost, the 2004 > > (the year I make the election) taxes and interest? > > > What If I had expensed the taxes and/or interest just once > > five years ago? What if only took the standard deduction on > > all tax returns for the last 10 years? > It can only be capitalized if the election was made for that > year. So using your example no interest or taxes could be > added to basis, except in the year of sale - and then only > if the election is made. > I believe Mike and I both read Dave's post to mean interest > and taxes could never be added to the basis of vacant land. > While I believe Dave meant it can't be retroactively added > via the election nor can it be added as > production/construction interest as no such activity > occurred. even prospectively is something one really needs to think about as just about every expense is going to be CURRENTLY deductible in one form or another. Interest as investment interest, RE tax as a typical Sch. A deduction, current maintenance costs could be considered investment expenses.... -- David M. Woods, EA, ChFC, CLU Woods Financial Services Norwood, MA 02062 www.woods-financial.com << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#18
02-21-2005, 08:44 AM
| |||
| |||
| Re: How do I treat interest paid on an investment property? "A.G. Kalman" <glendale202-mtm[at]yahoo.com> wrote: - quote - > MTW wrote:
I believe you make the election on an annual basis. I have> > David Woods, EA, ChFC, CLU wrote: > > > Interest is only capitalized on property not placed > > > in service, raw land in and of itself never CAN be placed in > > > service. > > What about the election available under IRC 266 as more > > fully explained by Reg. 1.266-1 ??? > I don't have a problem with making the election. I must > admit that I am not sure how the election is implemented > when it is after the fact. Here's the wording: > (3) If the taxpayer elects to capitalize an item or items > under this section, such election shall be exercised by > filing with the original return for the year for which the > election is made a statement indicating the item or items > (whether with respect to the same project or to different > projects) which the taxpayer elects to treat as chargeable > to capital account. > Does that mean if I make the election in 2004, the year I > sell land purchased 10 years ago, I can accumulate into cost > all the property taxes and interest I never expensed? Or > does it mean I can only accumulate as part of cost, the 2004 > (the year I make the election) taxes and interest? > What If I had expensed the taxes and/or interest just once > five years ago? What if only took the standard deduction on > all tax returns for the last 10 years? no problem capitalizing carrying costs of maintaining land. Since RE tax would be deductible anyway, as would the interest (as investment interest), I would be less inclined subject to facts and circumstances to capitalize those. -- David M. Woods, EA, ChFC, CLU Woods Financial Services Norwood, MA 02062 www.woods-financial.com << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#17
02-21-2005, 07:28 AM
| |||
| |||
| Re: How do I treat interest paid on an investment property? A.G. Kalman wrote: - quote - > What If I had expensed the taxes and/or interest just once
My understanding is that you are supposed to make this> five years ago? What if only took the standard deduction on > all tax returns for the last 10 years? election on an ANNUAL basis, and therefore any such election is only good for the particular year in question. However, I would be willing to bet that if you made the election ONCE and thereafter did NOT deduct any such carrying charges, the Tax Court might nevertheless allow the accumulation for the years subsequent to the election (but no guarantees from me on that). The standard deduction situation is a good question, and without research I don't have an answer for that. <grin Mostly, I was simply responding to David's assertion that interest could never be capitalized on land not "placed in service" (if I understood his comment correctly). MTW << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#16
02-21-2005, 07:09 AM
| |||
| |||
| Re: How do I treat interest paid on an investment property? David Woods, EA, ChFC, CLU wrote: - quote - > Wasn't made by the original poster.
I know.I was responding to your apparent assertion that interest could NEVER be capitalized on land not "placed in service" (if I understood your comment correctly). MTW << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#15
02-21-2005, 07:09 AM
| |||
| |||
| Re: How do I treat interest paid on an investment property? "A.G. Kalman" <glendale202-mtm[at]yahoo.com> wrote: - quote - > MTW wrote:
It can only be capitalized if the election was made for that> > David Woods, EA, ChFC, CLU wrote: > > > Interest is only capitalized on property not placed > > > in service, raw land in and of itself never CAN be placed in > > > service. > > What about the election available under IRC 266 as more > > fully explained by Reg. 1.266-1 ??? > I don't have a problem with making the election. I must > admit that I am not sure how the election is implemented > when it is after the fact. Here's the wording: > (3) If the taxpayer elects to capitalize an item or items > under this section, such election shall be exercised by > filing with the original return for the year for which the > election is made a statement indicating the item or items > (whether with respect to the same project or to different > projects) which the taxpayer elects to treat as chargeable > to capital account. > Does that mean if I make the election in 2004, the year I > sell land purchased 10 years ago, I can accumulate into cost > all the property taxes and interest I never expensed? Or > does it mean I can only accumulate as part of cost, the 2004 > (the year I make the election) taxes and interest? > What If I had expensed the taxes and/or interest just once > five years ago? What if only took the standard deduction on > all tax returns for the last 10 years? year. So using your example no interest or taxes could be added to basis, except in the year of sale - and then only if the election is made. I believe Mike and I both read Dave's post to mean interest and taxes could never be added to the basis of vacant land. While I believe Dave meant it can't be retroactively added via the election nor can it be added as production/construction interest as no such activity occurred. << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#14
02-21-2005, 07:09 AM
| |||
| |||
| Re: How do I treat interest paid on an investment property? David Woods, EA, ChFC, CLU" <dwoods[at]woods-financial.com> wrote: - quote - > "Drew Edmundson" <drewsbeagles[at]hotmail.com> wrote:
With this further information I now understand your prior> > David Woods, EA, ChFC, CLU" <dwoods[at]woods-financial.com> wrote: > > > "Bill" <an_ordinary_guy_158[at]hotmail.com> wrote: > > > > Stu707[at]hotmail.com posted: > > > > > In 1995 I purchased residential acreage. The > > > > > seller financed the purchase. I had no income > > > > > from the property. However, I sold in 2004 at a > > > > > profit. Can I deduct the interest I paid? And if > > > > > so where do I show the interest expense? > > > > Assuming you never "used" this interest as an expense item > > > > over the years, the standard method is to add it to the cost > > > > basis, when reporting the proceeds from sale on Schedule D. > > > I disagree. If this was strictly land, it was investment > > > property and any interest paid classified and deducted as > > > such. Interest is only capitalized on property not placed > > > in service, raw land in and of itself never CAN be placed in > > > service. > > Wouldn't the election under Reg. 1.266-1(b)(1) allow one to > > capitalize the interest (and taxes) on carrying unimproved > > land? > Sure. If it was made. Sure doesn't sound to me from the > original post that it was. post. I interpreted what you said as meaning one can never add the interest and taxes to the basis of vacant land. Now I see that you meant that it is not capitalized as construction period costs since nothing is being constructed. Perhaps I am a bit slow but that was not clear to me the way you phrased your original post. << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#13
02-18-2005, 12:52 PM
| |||
| |||
| Re: How do I treat interest paid on an investment property? "MTW" <mtwingcpa[at]yahoo.com> wrote: - quote - > David Woods, EA, ChFC, CLU wrote:
Wasn't made by the original poster.> > Interest is only capitalized on property not placed > > in service, raw land in and of itself never CAN be placed in > > service. > What about the election available under IRC 266 as more > fully explained by Reg. 1.266-1 ??? -- David M. Woods, EA, ChFC, CLU Woods Financial Services Norwood, MA 02062 www.woods-financial.com << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#12
02-18-2005, 12:33 PM
| |||
| |||
| Re: How do I treat interest paid on an investment property? "Drew Edmundson" <drewsbeagles[at]hotmail.com> wrote: - quote - > David Woods, EA, ChFC, CLU" <dwoods[at]woods-financial.com> wrote:
Sure. If it was made. Sure doesn't sound to me from the> > "Bill" <an_ordinary_guy_158[at]hotmail.com> wrote: > > > Stu707[at]hotmail.com posted: > > > > In 1995 I purchased residential acreage. The > > > > seller financed the purchase. I had no income > > > > from the property. However, I sold in 2004 at a > > > > profit. Can I deduct the interest I paid? And if > > > > so where do I show the interest expense? > > > Assuming you never "used" this interest as an expense item > > > over the years, the standard method is to add it to the cost > > > basis, when reporting the proceeds from sale on Schedule D. > > I disagree. If this was strictly land, it was investment > > property and any interest paid classified and deducted as > > such. Interest is only capitalized on property not placed > > in service, raw land in and of itself never CAN be placed in > > service. > Wouldn't the election under Reg. 1.266-1(b)(1) allow one to > capitalize the interest (and taxes) on carrying unimproved > land? original post that it was. -- David M. Woods, EA, ChFC, CLU Woods Financial Services Norwood, MA 02062 www.woods-financial.com << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#11
02-18-2005, 12:33 PM
| |||
| |||
| Re: How do I treat interest paid on an investment property? MTW wrote: - quote - > David Woods, EA, ChFC, CLU wrote:
I don't have a problem with making the election. I must> > Interest is only capitalized on property not placed > > in service, raw land in and of itself never CAN be placed in > > service. > What about the election available under IRC 266 as more > fully explained by Reg. 1.266-1 ??? admit that I am not sure how the election is implemented when it is after the fact. Here's the wording: (3) If the taxpayer elects to capitalize an item or items under this section, such election shall be exercised by filing with the original return for the year for which the election is made a statement indicating the item or items (whether with respect to the same project or to different projects) which the taxpayer elects to treat as chargeable to capital account. Does that mean if I make the election in 2004, the year I sell land purchased 10 years ago, I can accumulate into cost all the property taxes and interest I never expensed? Or does it mean I can only accumulate as part of cost, the 2004 (the year I make the election) taxes and interest? What If I had expensed the taxes and/or interest just once five years ago? What if only took the standard deduction on all tax returns for the last 10 years? -- Alan http://taxtopics.net << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#10
02-17-2005, 12:36 AM
| |||
| |||
| Re: How do I treat interest paid on an investment property? David Woods, EA, ChFC, CLU wrote: - quote - > Interest is only capitalized on property not placed
What about the election available under IRC 266 as more> in service, raw land in and of itself never CAN be placed in > service. fully explained by Reg. 1.266-1 ??? MTW << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#9
02-17-2005, 12:36 AM
| |||
| |||
| Re: How do I treat interest paid on an investment property? David Woods, EA, ChFC, CLU" <dwoods[at]woods-financial.com> wrote: - quote - > "Bill" <an_ordinary_guy_158[at]hotmail.com> wrote:
Wouldn't the election under Reg. 1.266-1(b)(1) allow one to> > Stu707[at]hotmail.com posted: > > > In 1995 I purchased residential acreage. The > > > seller financed the purchase. I had no income > > > from the property. However, I sold in 2004 at a > > > profit. Can I deduct the interest I paid? And if > > > so where do I show the interest expense? > > Assuming you never "used" this interest as an expense item > > over the years, the standard method is to add it to the cost > > basis, when reporting the proceeds from sale on Schedule D. > I disagree. If this was strictly land, it was investment > property and any interest paid classified and deducted as > such. Interest is only capitalized on property not placed > in service, raw land in and of itself never CAN be placed in > service. capitalize the interest (and taxes) on carrying unimproved land? -- Drew Edmundson << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#8
02-15-2005, 07:47 AM
| |||
| |||
| Re: How do I treat interest paid on an investment property? David Woods, EA, ChFC, CLU wrote: - quote - > "Bill" <an_ordinary_guy_158[at]hotmail.com> wrote:
I agree completely with David. Interest paid on a loan to> > Stu707[at]hotmail.com posted: > > > In 1995 I purchased residential acreage. The > > > seller financed the purchase. I had no income > > > from the property. However, I sold in 2004 at a > > > profit. Can I deduct the interest I paid? And if > > > so where do I show the interest expense? > > Assuming you never "used" this interest as an expense item > > over the years, the standard method is to add it to the cost > > basis, when reporting the proceeds from sale on Schedule D. > I disagree. If this was strictly land, it was investment > property and any interest paid classified and deducted as > such. Interest is only capitalized on property not placed > in service, raw land in and of itself never CAN be placed in > service. buy land bought and hold it for investment may not be capitalized. -- Alan http://taxtopics.net << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#7
02-13-2005, 11:34 PM
| |||
| |||
| Re: How do I treat interest paid on an investment property? "Frederick Jorden" <knowtax[at]bigfoot.com> wrote: - quote - > David Woods, EA, ChFC, CLU wrote:
I'll take your word for it. Even though there are actually> > "Bill" <an_ordinary_guy_158[at]hotmail.com> wrote: > > > Stu707[at]hotmail.com posted: > > > > In 1995 I purchased residential acreage. The > > > > seller financed the purchase. I had no income > > > > from the property. However, I sold in 2004 at a > > > > profit. Can I deduct the interest I paid? And if > > > > so where do I show the interest expense? > > > Assuming you never "used" this interest as an expense item > > > over the years, the standard method is to add it to the cost > > > basis, when reporting the proceeds from sale on Schedule D. > > I disagree. If this was strictly land, it was investment > > property and any interest paid classified and deducted as > > such. Interest is only capitalized on property not placed > > in service, raw land in and of itself never CAN be placed in > > service. > But if it can be put to agricultural use maybe it belongs on > schedule F or T. farms within five miles of my home, the likelihood of my ever having a farm client is somewhat nil. -- David M. Woods, EA, ChFC, CLU Woods Financial Services Norwood, MA 02062 www.woods-financial.com << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#6
02-11-2005, 08:24 AM
| |||
| |||
| Re: How do I treat interest paid on an investment property? David Woods, EA, ChFC, CLU wrote: - quote - > "Bill" <an_ordinary_guy_158[at]hotmail.com> wrote:
further, the saving grace being that any investment interest> > Stu707[at]hotmail.com posted: > > > In 1995 I purchased residential acreage. The > > > seller financed the purchase. I had no income > > > from the property. However, I sold in 2004 at a > > > profit. Can I deduct the interest I paid? And if > > > so where do I show the interest expense? > > Assuming you never "used" this interest as an expense item > > over the years, the standard method is to add it to the cost > > basis, when reporting the proceeds from sale on Schedule D. > I disagree. If this was strictly land, it was investment > property and any interest paid classified and deducted as > such. Interest is only capitalized on property not placed > in service, raw land in and of itself never CAN be placed in > service. not able to be deducted in the interim carries forth. ChEAr$, Harlan Lunsford, EA n LA Thu 10 Feb 2005 << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#5
02-11-2005, 07:26 AM
| |||
| |||
| Re: How do I treat interest paid on an investment property? David Woods, EA, ChFC, CLU wrote: - quote - > "Bill" <an_ordinary_guy_158[at]hotmail.com> wrote:
But if it can be put to agricultural use maybe it belongs on> > Stu707[at]hotmail.com posted: > > > In 1995 I purchased residential acreage. The > > > seller financed the purchase. I had no income > > > from the property. However, I sold in 2004 at a > > > profit. Can I deduct the interest I paid? And if > > > so where do I show the interest expense? > > Assuming you never "used" this interest as an expense item > > over the years, the standard method is to add it to the cost > > basis, when reporting the proceeds from sale on Schedule D. > I disagree. If this was strictly land, it was investment > property and any interest paid classified and deducted as > such. Interest is only capitalized on property not placed > in service, raw land in and of itself never CAN be placed in > service. schedule F or T. -- Frederick E. Jorden http://Tax-Accounting-Payroll.com 7825 Midlothian Tpk - 207 Richmond, VA 23235-5247 EMAIL knowtax[at]bigfoot.com (804) 320-6210 FAX (804) 320-6211 << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#4
02-10-2005, 08:27 AM
| |||
| |||
| Re: How do I treat interest paid on an investment property? - quote - > You don't "deduct the interest" you add the interest to your
Thanks, Ed and Thomas, for your replies.> cost basis (which reduces your gain). << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#3
02-10-2005, 08:08 AM
| |||
| |||
| Re: How do I treat interest paid on an investment property? "Bill" <an_ordinary_guy_158[at]hotmail.com> wrote: - quote - > Stu707[at]hotmail.com posted:
I disagree. If this was strictly land, it was investment> > In 1995 I purchased residential acreage. The > > seller financed the purchase. I had no income > > from the property. However, I sold in 2004 at a > > profit. Can I deduct the interest I paid? And if > > so where do I show the interest expense? > Assuming you never "used" this interest as an expense item > over the years, the standard method is to add it to the cost > basis, when reporting the proceeds from sale on Schedule D. property and any interest paid classified and deducted as such. Interest is only capitalized on property not placed in service, raw land in and of itself never CAN be placed in service. -- David M. Woods, EA, ChFC, CLU Woods Financial Services Norwood, MA 02062 www.woods-financial.com << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
|
#2
02-09-2005, 05:34 AM
| |||
| |||
| Re: How do I treat interest paid on an investment property? Stu707[at]hotmail.com posted: - quote - > In 1995 I purchased residential acreage. The
Assuming you never "used" this interest as an expense item> seller financed the purchase. I had no income > from the property. However, I sold in 2004 at a > profit. Can I deduct the interest I paid? And if > so where do I show the interest expense? over the years, the standard method is to add it to the cost basis, when reporting the proceeds from sale on Schedule D. Bill << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
| Tags |
| interest, investment, paid, property, treat |
Similar Threads | ||||
| Thread | Forum | Replies | Last Post | |
| Clarification on report property taxes paid in 2004 R L: My property tax bill for 2004 on my home is broken down into 2 payments, with the 2nd payment due this April. Does that mean on my 2004 1040, I... | Taxes | 6 | 01-24-2005 06:26 AM | |
| Interest deduction on non-us property Cricket Fan: Can I deduct interest paid on a home-loan taken outside the U.S.? I am planning to buy a property in India. The source of my income is in the... | Taxes | 2 | 11-29-2004 04:53 PM | |
| Query about property taxes not paid by escrow company Elizabeth Reid Steere: I would greatly appreciate some advice or pointers to information. I am originally from Australia but now live in Los Angeles, and the whole US... | Taxes | 4 | 09-13-2003 10:12 AM | |
| Property Tax deduction if Paid by Non-Owner dhensley: I am in AMT and State Property (Real Estate)tax is not deductible. I a third party friend pays my property tax (as a gift to me, under $10,000),... | Taxes | 14 | 09-07-2003 06:25 AM | |
| Thread Tools | |
| Display Modes | |
| |
Linear Mode
