What expenses are deductible when purchasing a rental property?

[jamie-m-todd]

Are any of these items deductible when purchasing a rental property - specifically a DST ?

 - Commissions

 - Dealer Manager Fees

 - Marketing & Due Diligence

 - Third Party Due Diligence

 - Acquisition Fee to TRS

 - Offering & Org Costs

 - Deferred Financing Costs?

If YES, which ones need to be depreciated (believe under “Any Miscellaneous Expenses” section), and which expenses can be applied all within the tax year (believe under “Any MISC Expenses”) ?

Does it matter if the rental property was acquired through a 1031 Exchange?

[RobertB4444]

All of those (except for marketing) would be acquisition costs and would be added to the depreciable basis of the property and depreciated for 27.5 years.  Marketing costs to advertise your rental as available are expensed as advertising.  It does not matter that it was acquired through a 1031 exchange.

@jamie-m-todd 

[jamie-m-todd]

Thank you Robert!

Do you think all of those items can be lumped together (minus the marketing) as a general "Acquisition Costs" in which the total amount is represented as a single additional Asset line item?  Additionally, the replacement property in the 1031 exchange is a distribution center, in which the building itself has a 39 year depreciation schedule.  Therefore, would the new "Acquisition Cost" asset need to have a 39 year depreciation schedule as well?

Could you also provide some guidance on how to enter this new item?  For example, under "Describe this Asset" would you choose "Rental Real Estate Property" or "Intangibles, Other Property"?   Are there any other specific choices I should make for this type of Asset?

Thanks!

Jamie

[DianeW777]

Yes. You will enter the total as acquisition costs with a 39 year recovery period.  You would select 'Intangibles, Other Property' as the asset type.  Then select  '31.5 or 39 year (Nonresidential Real Estate'.) Next, enter 39 years.