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Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.When you add an improvement to land, the IRS requires your to capitalize this cost rather than reporting it as an expense. This would mean that you add the cost of the stabilization to the basis of the property.The buildings are not a part of a business or rental so they too would add to the cost of the property and increase the basis but you would not deduct their costs untill you sold or changed the use of the property to business.
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Is there any filing required for the capitalization in the year which the expense is incurred? Or is the step up in basis simply taken in the year of sale? Thank you.
The year of sale. You would need to retain all your records for the improvements so you would have the increase in basis substantiated
Very well. Thank you.
You are most welcome.
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