I have a house sits on a large piece of land, and worked on it for several years, the land is divided into 3 parcels (Parcel 1 with the house, Parcel 2 is vacant land, parcel 3 has a house which was originally a detached ADU, houses on 1/3 will be rented). Throughout this process, there are various permit fees, sewer installation costs, etc. If the money is spent on Parcel 1/3, it is considered an improvement and can be depreciated immediately. For the money spent on Parcel, it does not need to be reported for tax purposes and can be treated as part of the basis for future sale?
How should expenses that are spent on all parcels simultaneously (such as permit fees) be handled?
here are some complications: the improvement (such as cleaning, connecting sewer for all 3 properties) was done in 2023 but the subdivide will only finalized in 2025. Until that I wish to keep all 3 parcels as one single property on taxes.
to do that I need to add depreciate assets to the property now? For cost that can directly be attributed to the parcel 1(such as connect to sewer, tree cleaning, road pavement), I will include it as one item.
For cost that can directly be attributed to the parcel 3, I will include it as an other item.
For cost that can directly be attributed to the parcel 2, I will ignore it for now and consider it as basis.
i am not sure about other cost, such as permit, geo, survey, city charge, bond, etc.
