I believe that the cost of improvements made to a rental property are added to the basis upon the sale of that property, in order to determine profit or loss. That is not the question.
Here is the question. Lets say an owner does Project A to a property. Project A is a true improvement, not a repair, which costs $2000. The taxpayer elects to deduct, rather than depreciate, that $2000 by virtue of using the small taxpayer or de minimis safe harbor.
In the future the owner sells the property. Does that $2000 get added to the basis to in determining the profit or loss? On the one hand it seems it should, as it was an improvement. On the other hand maybe it shouldn't, as it was deducted rather than depreciated. Or, put another way, does the decision to add the expense, or not, to the basis depend upon the work itself or how it was accounted for in the tax return?
This is NOT a question about what is an improvement vs a repair: assume the expense is an improvement. This is not about the safe harbors themselves: assume the deduction was done correctly.
Thank you in advance for your time and attention.
