Ipay the AMT. My real estate taxes are not deducted. May I add the tax to the cost basis of my property?
- posted
15 years ago
Ipay the AMT. My real estate taxes are not deducted. May I add the tax to the cost basis of my property?
No.
However, if the property is undeveloped land, you can elect to capitalize the taxes, interest and other carrying charges under IRC Sec. 266.
Katie in San Diego
Yes, but only for AMT purposes. This means that you will have a different basis for AMT than for the regular tax. When you sell the property, you need to remember this fact.
Another thing to consider is if your Schedule A deduction was effectively limited by AMT, you might be able to, in the following tax year, exclude some of your state tax refund as income.
(This issue has been discussed here in the past, and there were multiple opinions.)
Steve
taxes, interest and other carrying charges under IRC
Where does it say that IRC 266 applies only to undeveloped land?
"...only for AMT...." Where did that answer come from? I would
*love* to know how to do this!!! Tell me how!!
IRC 56(b)(1)(ii). As real property taxes are not deductible under AMT, the pro-rated share of real property taxes charged at acquisition or sale (i.e. in escrow) are addtional costs chargable to the capital account per IRC
263(a)(1) and/or 263A(a)(2)(B). It's treated just like any other fee or cost in the transaction that's not currently deductible in computing basis or disposition on sale.
taxes, interest and other carrying charges under IRC
If you own a house but don't rent it, live in it -- that is, it is purely for investment -- then does it satisfy 1.266-1(b)(i)?
Though from reading 1.266, it looks like 1.266-1(b)(2) allows you carry capital costs for real property. Maybe I read it wrong, but here goes:
No. I see nothing nothing in (b)(1)(ii) that mentions "real property taxes" of a vacant home held for investment.
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