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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16576
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I took a mortgage in 2006 to get an apartment constructed.

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I took a mortgage in 2006 to get an apartment constructed. The apartment was sold in 2012. The apartment was never used or rented and was purely investment property. I never deducted the mortgage interest. How to adjust the mortgage interest (add to cost basis or else?)

Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

In order to adjust for mortgage interest, you would need to file amended returns for the last three years and claim the mortgage interest on those returns.

Megan C :

Any other year, the deduction would not be a benefit to you - if you didn't take the deduction, you would lose it.

Megan C :

The only time that mortgage interest is added to basis is when the property is not being held for rent. If the building is being rented or is advertised as rented then you would have to deduct the cost as a current rental expense.

Megan C :

Do you have any further questions about this regard?

Customer:

Megan

Megan C :

I just noticed how you said that the house was never a rental unit. If that is the case, then you will add the cost of the real estate taxes into the basis. Then, you will deduct that from the sales price to arrive at the taxable amount

Customer:

Megan, The property was never rented (construction took 2006-2011) and I sold it within a few months of construction completion. My question was on interest on the mortgage that I never deducted. Can I add this to cost basis

Megan C :

Yes, you can add that to the cost basis

Customer:

The property was never rented. So just to reconfirm. I can add mortgage interest which was never deducted earlier to cost basis

Megan C :

That is correct, because it is just an investment property and not a rental.

Megan C and 2 other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Megan,


 


Do you know tax preparer who is well aware of the above and can help me prepare the taxes (I live in Cupertino, near San Francisco)

Thanks for your follow up. The terms of service of the site prohibit us from giving referrals (to keep people from using the site as a free advertisement!) However, you can look to your state board of accountancy for names of CPAs in your area.

Thanks!

Megan