real estate broker claims a portion of condo fees are addition to basis

Sorry, Mark, I never should have included the words "and/or assessments". I am only discussing the monthly HOA fees that cover a variety of expenditures. I don't believe an owner can on their own devise a method to allocate the spending found in an annual report. You have to have a consistent method used by all owners. The association should provide that break out.

I don't see why the annual financial statements wouldn't work. Each condo owner pays a specified percentage of all HOA dues, so they should be allocated that percentage of each type of expenditure.

___ Stu

Completing the improvement increases the VALUE of the house, but why should that be a requirement for increasing the BASIS?

These are expenses.

I agree it is in the nature of insurance, but since it is going towards an improvement, it does not count as an expense. Rather it becomes a depreciable item. The IRS says you can start depreciating after the item is **placed in service** (ready and available for its specific use). I doubt a capital improvement fund would meet that definition.

The only analogy I can come up with is in the depreciation rules, which speak to depreciation (which is based on the value of the property), beginning after items are "placed in service".

To expand on my previous answer:

With regard to the insurance premium, only the amount for one year's insurance is deductible (each year).

With regard to basis, there is a mention in the IRS publication on Residential Rental Properties, with regard to condominiums, indicating that "special assessments" for improvements may be recoverable by depreciation, so presumeably, that share of the particular fund would be added to the basis of the condominium in the event of sale.

I don't know if the IRS differentiates "special assessments" from an annual statement as to the percent of the condo fees that go into a roof replacement fund.

Expanding on my previous, there does seem to be a special mention regarding condominium rental properties where money going for a "special assessment" for improvements cannot be expensed and may be depreciable. So perhaps that applies in the event of a non-rented sold condo? Assuming the monies were defined as a "special assessment"?

I don't think cash is depreciable :-)

But when the condo spends it on a new roof, it's depreciable as roof-life property; or when the condo spends it on a fire alarm system, it's depreciable as fire-alarm-system-life property.

Seth