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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16547
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I need to understand how to report depreciation and expenses

This answer was rated:

I need to understand how to report depreciation and expenses related to a property I bought to fix-up for future resales. The property is bought through a LLC which has other rental property. My question is not related to rental but related to properties holding for future resale.

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 :

How are you today?

Megan C :

In terms of holding a property for resale, you cannot depreciate that property. You can only depreciate business property that has been placed into service. Holding for resale is not placed into service

Megan C :

If you got a tenant for the property, you could then begin depreciation. But not until the property is to be leased.

Megan C :

You would not depreciate, rather deduct the cost of the house and the cost of the rehab from the sales price upon the ultimate resale of the property.

Megan C :

Also, any expense incurred on the property is not deducted in the current period. It's added to the basis, which reduces the gain on your sale.

Megan C :

Did you have any further questions about this matter?

Megan C :

If not, please take a moment to rate my response as "excellent" so that I may receive credit for assisting you today

Customer:

For one of the property, I have placed ad to rent out a month back but not rented out yet. Could the depreciation and expense counted from when I place the AD or how this will work.

Megan C :

Yes, from the point of the ad forward you could, so long as you actually intend to rent it out

Megan C :

If you really have no intentions of renting the property, then you cannot deduct depreciation and repairs.

Customer:

I understand how it works now. Thanks.

Megan C :

You're welcome!

Megan C :

Is there anything else I can assist you with today?

Megan C :

If not, please take a moment to rate my response as "excellent" so that I may receive credit for assisting you today

Customer:

it is excellent, rating now.

Megan C :

Thanks so much!

Megan C :

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Thanks, Johnny for your positive rating. Please come back and visit me any time you have a tax, finance, or social security question that needs answered. It was a pleasure working with you today.