Could rental condo special assessment be added to basis as well as depreciated?

[rz19]

I has to pay for a special assessment on a condo property that I'm renting out for business income and reporting that income. The assessment was for pavement of the streets in the neighborhood, so I assume this cannot be deducted. In a different posting on this forum, it is mentioned that such improvements assessments can be both added to the basis and depreciated.  I'm trying to make sure I understand this correctly. 

In IRS publication 527, I read:
"Assessments for local improvements. Assessments for items which tend to increase the value of property, such as streets and sidewalks, must be added to the basis of the property. For example, if your city installs curbing on the street in front of your house, and assesses you and your neighbors for its cost, you must add the assessment to the basis of your property. Also, add the cost of legal fees paid to obtain a decrease in an assessment levied against property to pay for local improvements. You can’t deduct these items as taxes or depreciate them."

This last statement is confusing me. Am I misunderstanding the context? It seems to say I cannot depreciate the special assessment. Is it only referring to the previous sentence regarding cost of legal fees? Please clarify.

[RobertB4444]

That publication is referring to assessments against your residence.  Assessments against your business that are for improvements to the area and increase the value of your home are depreciated as rental real estate property over 27.5 years.  

Go ahead and create a new asset for the assessment and begin depreciating it as of the date that you paid it.

@rz19 

[rz19]

Thanks for clarification. Now to create a new asset for this assessment, in response to Turbotax question:

"How would you categorize this asset?"

Should I select:

"Residential Rental Real Estate" 

in order to get the 27.5 yrs life even though the improvement was effectively for the pavement of the roads  of the common land?

[Anonymous_ · Accepted solution]

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@rz19 wrote:

"How would you categorize this asset?"

Should I select:

"Residential Rental Real Estate" 

in order to get the 27.5 yrs life even though the improvement was effectively for the pavement of the roads  of the common land?

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Yes, selecting "Residential Rental Real Estate" is the proper way to get a recovery period of 27.5 years in the program.

[rz19]

Thank you so much for your prompt and clear response!