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Subject Author Date
Would this be a Capital Improvement? boostm3 03-21-2008
Posted by DF2 on March 21, 2008, 3:52 pm
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 In misc.taxes.moderated, boostm3 wrote:

>
>Ok.. that explains it..... But on a larger scale, what is the common
>line thats drawn to help decide whether a home's upgrade is considered
>Maintenance or a Capital Improvement?

You did not state why it matters to you. If this condo is not a
business, but is just your residence, most people would not find the
distinction to be worthwhile. Maybe you are claiming at least part
of the condo as used exclusively for business.

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Posted by boostm3 on March 21, 2008, 4:25 pm
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> You did not state why it matters to you. If this condo is not a
> business, but is just your residence, most people would not find the
> distinction to be worthwhile. Maybe you are claiming at least part
> of the condo as used exclusively for business.
>

If each unit owner were assessed $6000 for his share for a major
garage upgrade, or a cooling tower, whatever, and a portion of that
cost could be written off as a capital improvement, why would that not
be " worthwhile" ? I Didnt say anything about a business here . I
described the setup pretty thoroughly just as it is.. Condominum..
Unit Owners being assessed for capital improvements to the Common
elements of the condominium.. Lets take it as a given that these ARE
capital improvements so that we dont get off into that debate which is
a whole other matter, Im just trying to determine if typical
condominium ownership where the unit owners own their units and pay
common charges monthly to support the Common Elements of the
condominium would be entitled to write off a portion of their share of
the assessment which pays for the capital improvement to the
Condominium.

--
<< ------------------------------------------------------- >>
<< 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. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Paul Thomas, CPA on March 21, 2008, 5:20 pm
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> Im just trying to determine if typical condominium ownership
> where the unit owners own their units and pay common
> charges monthly to support the Common Elements of the
> condominium would be entitled to write off a portion of their
> share of the assessment which pays for the capital
> improvement to the Condominium.




"write off".......no.


In the case where there is the Condo Assn "pool" of funds for some future
capital improvement, the issue of just exactly what happens with the funds
would be of concern. Say the facts are different, and instead of a one-time
hit of thousands of dollars, they are assessed an extra $50 per month which
goes into the fund for some future, often unknown, major repair or capital
improvement. I would suspect what happens to your share of that fund upon
your sale of your unit would drive how it's treated. If it's refunded to
you, then it's nothing more than an escrow account - no deduction or basis
increase is warranted.


If you lose your escrow, meaning it stays with the Assn for that future
repair/improvement, then it most likely is a basis increase. The buyer
steps into the ownership position with an "ante" in the escrow already paid.


Often times though, the monthly fees cover regular maintenance, common
services (trash, etc), minor repairs to common areas, and the like. Unless
there's a stated amount that is restricted and set aside for this
improvement there's no reason to increases basis even though there is an
increase in cash reserves.

So the facts and circumstances pattern would dictate if the fees paid are
non-deductible personal expenses of maintaining the home, some type of
capital improvement that adds to basis, or a combination of the two.





--
Paul A. Thomas, CPA
Athens, Georgia

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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. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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Posted by DF2 on March 21, 2008, 6:37 pm
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In misc.taxes.moderated, boostm3 wrote:

>
>> You did not state why it matters to you. If this condo is not a
>> business, but is just your residence, most people would not find the
>> distinction to be worthwhile. Maybe you are claiming at least part
>> of the condo as used exclusively for business.
>>
>
>If each unit owner were assessed $6000 for his share for a major
>garage upgrade, or a cooling tower, whatever, and a portion of that
>cost could be written off as a capital improvement, why would that not
>be " worthwhile" ? I Didnt say anything about a business here . I
>described the setup pretty thoroughly just as it is.. Condominum..
>Unit Owners being assessed for capital improvements to the Common
>elements of the condominium.. Lets take it as a given that these ARE
>capital improvements so that we dont get off into that debate which is
>a whole other matter, Im just trying to determine if typical
>condominium ownership where the unit owners own their units and pay
>common charges monthly to support the Common Elements of the
>condominium would be entitled to write off a portion of their share of
>the assessment which pays for the capital improvement to the
>Condominium.

You cannot write off the expense/improvement for your residence,
just as a home owner who adds central air from scratch or who builds
a garage cannot deduct that.

It would only come into play as the basis for capital gains tax upon
sale if the exemption was not sufficient, so the distinction
question is not moot. It is the "writeoff" part that won't happen in
either case.

You would be able to deduct the property taxes that increase with
the value of your property. :-(

--
<< ------------------------------------------------------- >>
<< 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. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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