Tenant moved out on April 15,2018, and after that day, I put this rental property for sale on market.
There was a hole on the vinyl flooring that made by tenant, which I didn't repair, but buyer required me to repair after inspection, thus this kind of repair cost could either be treated as a rental expense (damage by tenant) or added to house basis (required fix by buyer). If I elect to report it as a rental expense, it will bring down my AIG towards 24% tax rate, while if I add it to house basis, it will reduce the long-term capital gain for a 15% tax rate, thus I should elect to report it as a rental expense. Am I right?
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I think the difference here is the definition of repair and capital improvement.
A repair is necessary to keep your property in working condition. If it was a hole that you had to repair, it probably would be classified as a repair or maintenance expense.
A capital improvement must be depreciated, and you can't depreciate property that you've held for less than a year. Therefore, it must be a repair.
This, from the instructions for Form 4562, Depreciation and Amortization:
Exceptions. Qualified property does not include
I think the difference here is the definition of repair and capital improvement.
A repair is necessary to keep your property in working condition. If it was a hole that you had to repair, it probably would be classified as a repair or maintenance expense.
A capital improvement must be depreciated, and you can't depreciate property that you've held for less than a year. Therefore, it must be a repair.
This, from the instructions for Form 4562, Depreciation and Amortization:
Exceptions. Qualified property does not include
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