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Posted by Phil Sandler on February 1, 2008, 2:15 pm
Please log in for more thread options All,
Thanks to everyone for their responses. Comments inline:
> "Phil Sandler" wrote:
> > I live in a new 4-unit building. Our real estate taxes for the
> > building were paid by the association through 2007, as we did not get
> > individual bills for our units until this year. Since we are a small
> > building, we run our own association and one of the owners acts as the
> > treasurer.
>
> This sounds strange. I've never seen a condominium project that could be
> sold before it had been platted and each unit assigned its own real estate
> tax designation.
Apparently this is common in Cook County (Chicago). Three of the four
units closed in 2006, and individual PINs for the units did not become
active until 2007 (taxes are paid in arrears in Chicago--I have no
idea if this is the case everywhere).
>
> > I live in a new 4-unit building. Our real estate taxes for the
> > building were paid by the association through 2007, as we
> > did not get individual bills for our units until this year.
>
> As the land/building was owned by the association or the builder/developer,
> one bill would have been presented to and due by that entity.
Yes, we received and paid one bill (two technically, as there are two
payments each year in Chicago).
> Property tax is often paid mid-year, for that year. As such, if you bought
> after the tax payment, you would (or should) see an adjustment for property
> taxes paid in advance by the seller on your closing statement (generally a
> HUD-1). That amount is what you get to deduct.
I'm not sure I'm clear on this. The amount of 2006 tax deposit the
seller paid at closing is the amount I can deduct? That seems counter-
intuitive to me; logically it would seem that the seller could deduct
that amount, while I would be able deduct the prorated amount for the
balance of the year.
To clarify with an example, let's say the total tax bill for the
building was $10,000, and each unit's share was exactly 25%. That
would mean each unit's ownership share would be $2500 of the tax bill
(theoretically, of course).
Now let's say we closed on April 1st, so we owned the property for 75%
of the year, and the seller owned it for 25% of the year. Let's
assume the seller correctly paid $625 as a tax deposit at closing.
We would then be able to deduct the $625, even though it was
technically not paid by us, and wasn't paid in the year 2007?
> > It seems to me that each unit should be able to deduct their
> > percentage of ownership of the building on their 2007 taxes.
>
> Were they paying for taxes that ~~~YOU~~~ legally owed?
> You can't take a deduction for taxes you didn't owe.
No, the taxes were for the whole building, by the association. So it
sounds like what you are saying it we can't deduct our percentage.
> > Assuming this is the case:
>
> > 1. Could someone point me toward something in the tax code that
> > indicates this is allowed?
> > 2. How would the association furnish proof/documentation of this
> > payment (and each individual's share) to the IRS?
>
> As far as proof, what document does the association have that they paid by?
> Does it break down the tax by unit?
Again, we just got two tax bills for the whole building, which was
paid by the association. We only have the paid bill and the cancelled
check (and I guess the allocation of ownership for each unit).
In general, it seems to me that if real estate taxes are paid,
*someone* should logically get to take a deduction somewhere. Maybe
that's naivety on my part. :)
Thanks again for your thoughtful responses. Any additional insight
would be appreciated.
Phil
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