Upon death of decedent, estate inherited shares of no-longer-occupied co-op apartment. Estate placed unoccupied apartment on market, but it took nearly two years to sell it. During that time, estate paid for insurance on apartment (as required by proprietary operating lease), as well as monthly "maintenance" fee billed by co-op corporation (covering capital improvements, real estate taxes, interest, utilities for common areas, wages of building staff, etc.). Would the full monthly maintenance fee either be added to the basis of the co-op shares as investment ownership costs, or deductible as estate administration expenses?
@LMtax wrote:
Would the full monthly maintenance fee either be added to the basis of the co-op shares as investment ownership costs, or deductible as estate administration expenses?
You can certainly deduct real estate taxes in the year they are paid and can add improvements to the cost basis of the property (shares), but you have to be cautious with ownership costs.
Per Treas. Reg. §1.67-4(b)(2), if the ownership costs would be commonly or customarily incurred by a hypothetical individual owner as miscellaneous itemized deductions (on Schedule A), they are not deductible.
The full monthly maintenance fee and insurance are deductible as estate administration expenses for maintaining the co-op.
@LMtax wrote:
Would the full monthly maintenance fee either be added to the basis of the co-op shares as investment ownership costs, or deductible as estate administration expenses?
You can certainly deduct real estate taxes in the year they are paid and can add improvements to the cost basis of the property (shares), but you have to be cautious with ownership costs.
Per Treas. Reg. §1.67-4(b)(2), if the ownership costs would be commonly or customarily incurred by a hypothetical individual owner as miscellaneous itemized deductions (on Schedule A), they are not deductible.