Vacation Condo Sale - association dues part of basis?
Mike F
fee to do minor repairs like replace siding and paint, but
we also did some major repairs like replacing the roof. Can
I add some of the association dues to the basis of what I
purchased the condo for to help off-set the capital gain?
I owned the condo for 9 years and never rented it or and
never lived in it for 2 years over the past 5 years, so I am
exempt from the $250,000 home sale limit.
Thanks in advance.
Mike
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Dick Adams
> I owned a vacation property that had an annual association
> fee to do minor repairs like replace siding and paint, but
> we also did some major repairs like replacing the roof. Can
> I add some of the association dues to the basis of what I
> purchased the condo for to help off-set the capital gain?
>
> I owned the condo for 9 years and never rented it or and
> never lived in it for 2 years over the past 5 years, so I am
> exempt from the $250,000 home sale limit.
Life is like running a moonshine still. You can do anything
you want until the revenue agents come calling.
Can you do it and pass inspection on an audit? NO!
What you can do is a 1031 exchange for other vacation
property. That is if you purchased the condo with the
anticipation of selling it as a gain. If you want the
cash, pay the tax.
Dick
sftydvr
> I owned a vacation property that had an annual association
> fee to do minor repairs like replace siding and paint, but
> we also did some major repairs like replacing the roof. Can
> I add some of the association dues to the basis of what I
> purchased the condo for to help off-set the capital gain?
>
> I owned the condo for 9 years and never rented it or and
> never lived in it for 2 years over the past 5 years, so I am
> exempt from the $250,000 home sale limit.
If this was meant as a joke, please take it elsewhere. If
it's a serious discussion be sure to do your tax return
yourself because a professional might have difficulty
following your "logic".
BC
Harlan Lunsford
> I owned a vacation property that had an annual association
> fee to do minor repairs like replace siding and paint, but
> we also did some major repairs like replacing the roof. Can
> I add some of the association dues to the basis of what I
> purchased the condo for to help off-set the capital gain?
>
> I owned the condo for 9 years and never rented it or and
> never lived in it for 2 years over the past 5 years, so I am
> exempt from the $250,000 home sale limit.
From what you say I think you understand the ramifications
of having had a vacation property which was not your
personal principal residence. And the condo association fees
were personal expenses.
The roof replacement will add to your basis when you sell
it, but otherwise, you've got capital gains on which to pay.
Cheer$,
Harlan Lunsford, EA n LA
Vic Dura
>> fee to do minor repairs like replace siding and paint, but
>> we also did some major repairs like replacing the roof. Can
>> I add some of the association dues to the basis of what I
>> purchased the condo for to help off-set the capital gain?
>>
>> I owned the condo for 9 years and never rented it or and
>> never lived in it for 2 years over the past 5 years, so I am
>> exempt from the $250,000 home sale limit.
> If this was meant as a joke, please take it elsewhere. If
> it's a serious discussion be sure to do your tax return
> yourself because a professional might have difficulty
> following your "logic".
Perhaps you've lost track of how complex and confusing tax
regs look to someone not expert in them. It seemed like
reasonable question from a confused lay person. Why not just
say something like "no you can't do that"? No need to insult
the fellow by rudely referring to his question as a joke. I
thought one of the purposes of this group was to help lay
people.
--
To reply to me directly, remove the XXX characters from my
email address.
MTW
> The roof replacement will add to your basis when you sell
> it...
Maybe, maybe not. Remember all those discussions we had last
year about roof replacements on rental properties and how
the IRS has been consistently losing the "capitalization"
argument in tax court? In other words, the court held that
the roof replacements were deductible repairs (on a
business/rental property) in most cases. If a new roof is a
"repair" then it would NOT be capitalized (and, in the case
of a personal use property, it would NOT be deductible).
Is there any rationale for holding that a roof replacement
on a personal use property is somehow different from a roof
replacement on a rental property? This is where the IRS
~gets even~ for their tax court defeats! <g>
MTW
Seth Breidbart
>> I owned a vacation property that had an annual association
>> fee to do minor repairs like replace siding and paint, but
>> we also did some major repairs like replacing the roof. Can
>> I add some of the association dues to the basis of what I
>> purchased the condo for to help off-set the capital gain?
>>
>> I owned the condo for 9 years and never rented it or and
>> never lived in it for 2 years over the past 5 years, so I am
>> exempt from the $250,000 home sale limit.
> If this was meant as a joke, please take it elsewhere. If
> it's a serious discussion be sure to do your tax return
> yourself because a professional might have difficulty
> following your "logic".
I suspect the difficulty is with the word "exempt". It
looks to me like OP is admitting that the $250,000 exemption
doesn't apply to him (but he doesn't understand it).
The answer to his question is, I think, "Yes". The amount
of the association dues that was used for major repairs
which would have been added to the basis if the condo had
been a separate house, still get added to the basis. If the
condo association didn't itemize them in its statements, he
might have trouble determining how much that was.
Seth
Harlan Lunsford
> Harlan Lunsford <lun...@bellsouth.net> wrote:
>> The roof replacement will add to your basis when you sell
>> it...
> Maybe, maybe not. Remember all those discussions we had last
> year about roof replacements on rental properties and how
> the IRS has been consistently losing the "capitalization"
> argument in tax court? In other words, the court held that
> the roof replacements were deductible repairs (on a
> business/rental property) in most cases. If a new roof is a
> "repair" then it would NOT be capitalized (and, in the case
> of a personal use property, it would NOT be deductible).
>
> Is there any rationale for holding that a roof replacement
> on a personal use property is somehow different from a roof
> replacement on a rental property? This is where the IRS
> ~gets even~ for their tax court defeats! <g>
Yes I know about those cases. However I capitlize ALL of
roof replacements , maybe just as habit. Anyway, those
cases allowed such expenditures as repairs, but didn't
require they be treated that way, right?
Cheer$,
Harlan Lunsford
MTW
> Anyway, those
> cases allowed such expenditures as repairs, but didn't
> require they be treated that way, right?
That's an interesting point. If Mr. Zollars is lurking
around here somewhere, I would be interested in hearing his
opinion on that (or maybe we'll have to wait until after
April 15th).
But, as a general concept, I'm not sure that you can
~voluntarily~ elect to capitalize (and thereby defer)
selected expenses unless some code section specifically
allows or requires such treatment.
MTW
LoTax
> The answer to his question is, I think, "Yes". The amount
> of the association dues that was used for major repairs
> which would have been added to the basis if the condo had
> been a separate house, still get added to the basis. If the
> condo association didn't itemize them in its statements, he
> might have trouble determining how much that was.
What can the condo association [i.e. its manager and its
accountant] do that would help the unitowners get a better
result in this situation? Would insisting on separate -
maybe special - assessments for the "capital" things be a
worthwhile exercise? I've been thinking about askin this
question for several years now...
LoTax
MTW
> What can the condo association [i.e. its manager and its
> accountant] do that would help the unitowners get a better
> result in this situation? Would insisting on separate -
> maybe special - assessments for the "capital" things be a
> worthwhile exercise?
It has always seemed to me that condo associations COULD do
a better job in terms of advising the homeowners of items
that ~might~ be capitalizable (or deductible). However,
given the strict approach to "repairs" that the Tax Court
has taken lately, I'm not sure that ANYTHING done by the
condo association could be properly capitalized. It would
have to 1) increase the FMV, or 2) extend the useful life,
or 3) adapt to a new use, or 4) be part of an overall plan
of rehabilitation.
It seems to me that only the 4th item might produce some
fertile ground for the association. But, unfortunately,
there is very little guidance in this area. Presumably the
"plan" would have to span a relatively short time frame. So,
for example, a string of major repairs scheduled over a
(say) 5 year period might not be "compact" enough to
constitute a "plan." Who knows...
MTW
Drew Edmundson
> MTW wrote:
>> Harlan Lunsford <lun...@bellsouth.net> wrote:
>>> The roof replacement will add to your basis when you sell
>>> it...
>> Maybe, maybe not. Remember all those discussions we had last
>> year about roof replacements on rental properties and how
>> the IRS has been consistently losing the "capitalization"
>> argument in tax court? In other words, the court held that
>> the roof replacements were deductible repairs (on a
>> business/rental property) in most cases. If a new roof is a
>> "repair" then it would NOT be capitalized (and, in the case
>> of a personal use property, it would NOT be deductible).
>>
>> Is there any rationale for holding that a roof replacement
>> on a personal use property is somehow different from a roof
>> replacement on a rental property? This is where the IRS
>> ~gets even~ for their tax court defeats! <g>
> Yes I know about those cases. However I capitlize ALL of
> roof replacements , maybe just as habit. Anyway, those
> cases allowed such expenditures as repairs, but didn't
> require they be treated that way, right?
I disagree. The court ruled the activities were a repair
not an improvement. I didn't see anything in the cases that
provided an option to the taxpayer. From Oberman (47 TC
471): "We think that the expenditure in question should
properly be considered as a deductible ordinary and
necessary business expense rather than a capital
expenditure."
No ambiguity in that statement. No election mentioned
either. In Oberman the court looked at the purpose of the
activity. Was the purpose to repair a leaky roof?
So if the reason for replacing the OP's condo roof was to
fix a leak and the replacement did not add to the value or
substantially extend the life then it looks like a repair.
The court said "any properly performed repair adds value as
compared with the situation existing immediately prior to
the repair, but the proper test is whether the expenditure
materially enhances the value, use, life expectancy,
strength, or capacity as compared with the status of the
asset prior to the condition necessitating the expenditure."
The court also indicated a replacement might be capital. But
it is clear to me, from this case and others, that they
meant a structural replacement not just a re-shingling.
Drew Edmundson, CPA (NC)
Seth Breidbart
>> The answer to his question is, I think, "Yes". The amount
>> of the association dues that was used for major repairs
>> which would have been added to the basis if the condo had
>> been a separate house, still get added to the basis. If the
>> condo association didn't itemize them in its statements, he
>> might have trouble determining how much that was.
> What can the condo association [i.e. its manager and its
> accountant] do that would help the unitowners get a better
> result in this situation? Would insisting on separate -
> maybe special - assessments for the "capital" things be a
> worthwhile exercise?
When I owned a co-op, each year the financial statement I
got included the amount of my payments that was deductible
as Real Estate Taxes, the amount that was deductible as
Mortgage Interest, and the amount that should be added to my
Cost Basis.
Seth
Drew Edmundson
> LoTax <lo...@hotmail.com> wrote:
>> se...@panix.com (Seth Breidbart) wrote:
>>> The answer to his question is, I think, "Yes". The amount
>>> of the association dues that was used for major repairs
>>> which would have been added to the basis if the condo had
>>> been a separate house, still get added to the basis. If the
>>> condo association didn't itemize them in its statements, he
>>> might have trouble determining how much that was.
>> What can the condo association [i.e. its manager and its
>> accountant] do that would help the unitowners get a better
>> result in this situation? Would insisting on separate -
>> maybe special - assessments for the "capital" things be a
>> worthwhile exercise?
> When I owned a co-op, each year the financial statement I
> got included the amount of my payments that was deductible
> as Real Estate Taxes, the amount that was deductible as
> Mortgage Interest, and the amount that should be added to my
> Cost Basis.
Co-ops are different beasts under the tax law. The same
rules don't apply to condominiums.
Drew Edmundson, CPA (NC)