Is it possible to amend taxes for capitalizing carrying costs on vacant land? Code Section 266 and IRS Regulations 1.266-1

[kfink85]

We are considering selling some vacant land that we bought in December 2017. I did not make this election for 2018 where the bulk of our carrying costs were spent. Can I amend our taxes to now include this?

https://www.nolo.com/legal-encyclopedia/tax-deductions-vacant-lands.html

"If you don't itemize your deductions on your tax return, you won't be able to deduct the property tax and interest expenses you incur from owning vacant land. In this event, you should elect to add these expenses to your land's cost basis. This will reduce any taxable profit you earn when you sell the property."

Also, I saw another article that mentions a private letter ruling allowing this but it suggested I would need to get our own private letter ruling, which is apparently pricey. Is this really necessary?

[tagteam]

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@kfink85 wrote:

Can I amend our taxes to now include this?

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The problem you are going to have to confront is Section 1.266-1(c)(3) which states, in relevant part:

If the taxpayer elects to capitalize an item or items under this section, such election shall be exercised by filing with the original return for the year for which the election is made a statement....

Consequently, you need to make the election by filing the statement, as specified, with your original return.

Unless there are thousands of dollars of tax savings here, a PLR is just not cost effective and the only avenue at this point would be to amend the return to include the statement, but it is painfully clear that is not technically correct according to the Regulation.