For the allocation - So if sales proceeds are $100,000 with $20,000 allocated to land and $80,000 allocated to the building structures, you will further allocate this total for the rental structures to each structure (rental house plus capital improvements) based on each assets original cost over the total of all original costs for these assets.
If the original cost basis of the rental house was $40,000, the a/c unit was $5,000 and the roof was $10,000. Then the allocation of the $80,000 of sales proceeds would be: rental house - $58,182 (40,000/55,000 * 80,000), a/c unit - $7,273 (5,000/55,000 * 80,000) and roof - $14,545 (10,000/55,000 * 80,000).
If repairs made while still available for renting, then rental expenses. If the repairs were done while not available for rent but to help sell, the IRS considers these nondeductible personal expense unless they are capital improvements (which are added to the basis in the rental property).
