My Client is building storage buildings. In 2006 he mortgaged his house for capital to begin his business. He also paid real estate taxes when he closed on the land. The taxpayer has many many start up expenditures and organizational costs. He and his wife organized as an LLC with each of them being members. They want to be taxed as a partnership. Do I have to capitalize the "home mortgage interest", or can I deduct it on his 2006 personal return as an itemized deduction? Do I have to capitalize the real estate taxes or could they also be considered a Schedule A deduction for investment property? Both interest and real estate taxes seem to be specifically excluded as "start-up expenditures if they are deductible. The business has not begun.....as they are still in the construciton phase so I don't think they are deductible???? Perhaps I file a 1065 with no income, deduct the interest and real estate taxes, and flow the expenses back to the partners through their K-1's. I am wanting to file a 1065 for 2006 just to make IRC Section 709 and 195 elections. Any thoughts??
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