How can engineering/feasibility study costs be deducted for real estate that I intended to purchase and develop, but did not purchase based on the results of the study?

[Carl]

There is no deduction for that unfortunately, since you didn't follow through and buy.  It's no different than if you put down a non-refundable good faith deposit to buy a property, and then backed out of the deal. Nothing to deduct or claim.

[bwa · Accepted solution]

What was the real estate going to be purchased for?  If it was for your personal residence it would not be deductible.  If it was property for an existing business or ongoing rental activity it may be deductible.

[Carl]

I didn't think that far ahead. Key words are "existing" business or "ongoing" rental activity.

[samatthees]

Property was a 4 lot short plat. Intention was to purchase, develop/improve, and re-sell for profit. Engineering study was performed during the due diligence period after signing an offer on the property. Offer was rescinded after receiving results of engineering study and subcontractor bids.

[bwa]

If you were in an existing business that does this, the costs would be a deductible business.

If not, and if the acquisition failed you likely would have no deduction as they were not expenses of an existing trade or business..

[Debmtb7]

If I am a primary member of an LLC whose focus is real estate rental property acquisition, could the expenses for a feasibility study on a property the LLC did not purchase be deducted?