We had a condo rental for many years and show Cap Gains after sale in 2017. For years, in identifying expenses, we listed major improvements each tax year. Now that we?ve sold it we were wondering if these same major improvements (flooring, HVAC upgrades, etc) can be listed on 2017 Cap Gains to lower final Cap gains taxes.
It is unclear from your post whether you have been reporting your rental income properly all these years. Major improvements such as replaced flooring (assumes something more than just some rugs), HVAC upgrades, etc. should have been capitalized and depreciated each year, not taken as expenses. The sale of the condo would generate capital gain (or loss) plus the possibility of depreciation recapture. All of this would ultimately flow to Schedule D.
If you haven't done so in the past, you may want to consult a tax professional to review your handling of the income from and sale of the rental property.
Ira Smilovitz, EA
ira smilovitz wrote in news: snipped-for-privacy@googlegroups.com:
ISTM that typically if you do an improvement, you create a new asset or assets (depending on asset life) in the year you place the improvement in service. When you sell the unit you effectively sell all the assets as a bundle. I suppose you have to allocate the sale price among the assets in some reasonable manner.
scott s. ..
That is correct. However, if you are selling all of the component parts of the asset at once (such as when you sell an improved condo), it doesn't usually matter how you allocate the sales price, because all of the component gains will be long term and the total gain is invariant. Accurate allocation only becomes important if some of the capitalized improvements are still short-term.
Ira Smilovitz, EA
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