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Posted by joeu2004 on April 11, 2008, 3:01 pm
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I should note that the following has nothing to do with me, and it
does not even have any practical importance. That is, I am not
really seeking advice. (If I were, of course I should expect to pay
for it, especially in this case, where a lot of money is at stake.)
But it is based on something that I read about and piqued my
curiosity.
Are legal costs incurred while seeking a permit to build on
newly-purchased land added to the basis of the property, even
if the permit is eventually denied?
If so, how much of the building contractor's costs can also add
to the basis of the property if the permit is eventually denied?
Just the costs incurred to try to justify the permit; or also the
architect's costs incurred as part of the building process, which
of course must be completed before requesting a permit to build?
If the permit were eventually granted, I would think that those
costs are simply added to the cost to build, which "obviously"
becomes part of the basis. Right?
But if the permit is denied, those costs were not part of the cost
of acquiring the land. On the other hand, the land was purchased
with the primary (if not sole) intent of building on it; an architect
was hired within 12 months after purchasing the land. I don't
know if that makes any difference.
At issue is: the permit approval process has taken more than
two years; in fact, it still is not resolved. It was initially
denied;
an attorney was hired, the decision was appealed, and the
permit was granted on appeal; then some committee members(!)
filed an appeal to put the grant aside and rehear the permit
request before the full council.
At this point, there is at least a 50% chance that the permit
will be denied once again and finally.
In the meantime, the permit process has cost the owners
between 2.5% and 5% of the cost of the property -- a significant
amount.
(Arguably, they might seek to recover some of that cost through
litiagation. But that's a legal matter, unrelated to the tax issue
I am asking about here. And I am getting ahead of myself.)
--
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Posted by removeps-groups@yahoo.com on April 12, 2008, 1:06 am
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> Are legal costs incurred while seeking a permit to build on
> newly-purchased land added to the basis of the property, even
> if the permit is eventually denied?
What is the meaning of "to defend and perfect a title"? I keep
reading about this, but no-one says what it means. My gut feeling is
that your costs can be capitalized, but I'm not sure.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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<< Copyright (2007) - All rights reserved. >>
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Posted by Stuart Bronstein on April 12, 2008, 11:26 am
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> What is the meaning of "to defend and perfect a title"? I keep
> reading about this, but no-one says what it means. My gut feeling is
> that your costs can be capitalized, but I'm not sure.
It means that someone either does or might claim ownership of a certain
property (or part of it), and a court may be or has been asked to
resolve the issue.
Stu
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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