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Non-built remodel plans part of basis?

Each year we do some amount of capital improvement to our house -- permanent improvements, additions, things that should be legitimate capital investments -- and add the total costs to the basis.

(These costs are also added to depreciation schedule, since a sizable fraction of the house is sublet as a rental unit.)

Some years back we invested fairly big bucks in an architectural design and preliminary plans for a really major remodel -- then at last minute decided not to actually do it.

Can those bucks also be added to the basis, on grounds that "they were part of a continuing every year process of improvement to the house, or intended for same at time spent" -- or something like that?

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AES
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Not for the reason you give. Do the plans themselves have any market value (i.e. you could sell the house for more with plans included than without)?

I'm thinking of a situation I know where the owner of some vacant land had trees cleared and paid for plans (subject to homeowners association approval) and permits to build a house, but then decided to sell instead. The cost of the plans would be included in the basis when calculating gain on sale.

It comes down to "facts and circumstances", but in your case it doesn't sound reasonable to me to include the cost of the plans in your basis. And I don't see how any capital improvement, let alone something intangible like a plan, made only to the personal portion of your residence could be depreciated on the rental activity.

-Mark Bole

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Mark Bole

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