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Author: Katarn Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121461  
Subject: Real Property Sale Date: 1/30/1998 5:27 PM
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In 1997, I sold some land that I had purchased about 12 years ago. It was purchased for the purpose of building a home, but nothing was ever done with it (It is not business property). I need to know what I can use to adjust the BASIS or deduct. I have the following expenses:
Closing costs on purchase and sale.
Property tax
Interest on loan
Subdivision assessments for road improvement, etc.

The tax books always use the terms "may be deductible" but don't clearly state when the "may" is a definite "yes" or "no". Any help would be appreciated.

Katarn
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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1654 of 121461
Subject: Re: Real Property Sale Date: 2/1/1998 10:02 AM
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[[In 1997, I sold some land that I had purchased about 12 years ago. It was purchased for the
purpose of building a home, but nothing was ever done with it (It is not business property). I need
to know what I can use to adjust the BASIS or deduct. I have the following expenses:
Closing costs on purchase and sale.
Property tax
Interest on loan
Subdivision assessments for road improvement, etc.]]

Sorry, but no black and white answers here. Not without knowing more about the issues. For additional information on the basis of property, check out IRS Publication 551 at the IRS web site.

Generally your closing costs on the purchase are an addition to basis. Your closing costs on the sale of the property are expenses of the sale (reducing your profit).

The property taxes are generally "period" expenses which are deducted on an annual basis. There are situations where property taxes must be capitalized and added to the basis of the property, but I doubt that you are in this situation.

Same thing with interst expense. Sounds like the property was investment property (at least for some time...could have been home mortgage for a while), and the expense is a period expense which should have been deducted in the past on your annual tax returns. Again, I doubt that you would meet the rules that would cause the interestest to be capitalized.

Generally, the expenses incurred in subdivision will add to the basis of the property.

TMF Taxes
Roy

SPECIAL NOTE: I try to answer as many questions as I can each week, and I generally select those that have not been asked before. If you don't get a detailed answer to your question, it is probably because my time is so limited during tax season, or because it has already been asked and answered in this folder in the past, or because it has been discussed in the Taxes Frequently Asked Questions area. In order to visit the Taxes FAQ area, go to the Fool's School area (http://www.fool.com/school.htm) and check out "Other Features" in the list box, OR you can jump directly to the Taxes FAQ area (http://www.fool.com/school/taxes/taxes.htm). Additionally, if any references were made to the IRS Web Site, you can get there by pointing your web browser to (http://www.irs.ustreas.gov)


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