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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13989
Experience:  15years with H & R Block. Divisional leader, Instructor
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I have a client who is paying a tenant $60k to vacate a rent

Customer Question

I have a client who is paying a tenant $60k to vacate a rent stabilized apartment and use it for personal residence. I am inclined to think it should be capitalized into the value of the residence, he however would like to expense it immediately. It is generally treated as capital gain for the tenant, is it not added to the basis of the building for the owner?
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.
Hello and thanks for trusting me to help you today. I am a tax adviser with over 20 years of experience.
You are correct in thinking that the cost is added to the basis of the home.
If he is "buying" a main residence he would have no legal way to expense the cost. This is not business property. Personal use property does not get to depreciate or claim all cost in the year of purchase (or for improvements).
The cost adds to the buyer's basis.
Expert:  Robin D. replied 1 year ago.
Please advise if you need more information
Customer: replied 1 year ago.
Please note he is not buying a residence, he is simply getting them to vacate it and will settle in it himself.
Expert:  Robin D. replied 1 year ago.
He is changing this to personal use. That is the issue. He cannot expense the $60k nor use it as a deduction. It is a part of the cost of the residence for him now and is simply added to the basis.