No deduction shall be allowed for amounts paid or accrued for such taxes and carrying charges as, under regulations prescribed by the Secretary, are chargeable to capital account with respect to property, if the taxpayer elects, in accordance with such regulations, to treat such taxes or charges as so chargeable.§266
Sure, that way when it's sold, there'll be a tax benefit, you said there's no income now right?
No income for a few years. We would like to expense the property taxes.
I dont understand .. no income to offset it with right?
We would like to take a deduction on the companies tax return.
the LLC has other income?
No income, however, the company is an LLC and the loss will flow through to the partners' personal returns.
I understand ... thought you meant the individual had no other income
Hang on a sec ...
Yep, no reason not to
Deductible real estate taxes are generally any state, local, or foreign taxes on real property. They must be charged uniformly against all property in the jurisdiction at a like rate. Many states and counties also impose local benefit taxes for improvements to property, such as assessments for streets, sidewalks, and sewer lines. These taxes cannot be deducted. However, you can increase the cost basis of your property by the amount of the assessment. Refer to Publication 551, Basis of Assets, for more information. Local benefits taxes are deductible if they are for maintenance or repair, or interest charges related to those benefits.
... thought I saw that he IS selling it
Then the deductibility will hold up in an audit? When he can he will sell the property, but hasn't had any sales for a few years.
Understand now ... Is the LLC a single member?
No. The partners are two LLC's.
Do you have access to the operating agreement? Is there a stated business purpose for the LLC?
I think you're fine, but hang with me a minute ... let me get some doc..
I know construction period interest and property taxes have to be capitalized, however, there is no construction going on on the properties.
Yep, I'm thinking this is now essentially investment real estate and would go on schedule E
Okay, so what I'm getting from you is we should expense the property taxes and you think that position would hold up in an audit by the IRS?
What do the other two LLCs do?
The one that is our client is "Real Estate" as the business activity and product or service.
Excellent .. and you're doing a 1065 right?
You're good, it will hold up ... just found this in the tx guide:
No matter what kind of real estate business you are in, you can deduct all of the mortgage interest and property taxes paid on your investment properties
Okay. Thanks. Is that everything you have to say on the matter?
I mean can you cite the booklet, etc.
Here's you citation
Also from IRC §162 itself
again, as this has become held only for investment, it is deductible in the current year
Okay. I think I'm satisfied. Thanks.
You're welcome ... just wanted to find the backup, feel free ot bookmark and come back for reference
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