Sales expenses apply to both the buyer and the seller. So which are you? I assume this is for a rental property or some other kind of business property you either bought or sold?
What kind of closing statement do you have? Is it a HUD-1 form maybe?
There are two types of sales expenses when it comes to real estate.
- Those expenses associated with acquisition of the property are added to the cost basis of the property. Examples of this would include title transfer fees paid at the courthouse where the title/deed to the property is filed.
- Those expenses related to acquisition of the loan are amortized (not capitalized) and deducted (not depreciated) over the life of the loan. Examples of this would include points on the loan, and the cost of a property appraisal if such appraisal was required by the lender as a condition of qualifying for the loan.
Hi. I sold a vacant parcel of land in 2019 that I never got a chance to develop for myself . Can you tell me what charges from the settlement statement I apply to sales expenses and which ones I add to the basis? Thank you.
It depends.
I would recommend that you make sure you pick up all of the selling expense from your closing report to ensure you accounted for all of the costs associated with the sale of the land. This would include items such as commissions, appraisals, broker fees, legal fees, advertising, etc. See the following link for additional details.
You would only be able to add the costs for any improvements made to the basis of your land costs.