Treatment of rental expenses prior to placing in service

[cottagecharm11]

We started a new construction build of a rental in the 2021 tax year. We did not place it in service until August of 2022. There were a lot of expenses in both the 2021 and 2022 tax years. This was a 1031 improvement exchange that was about 1/3 completed at the end of the 1031 deadline.  We understand that the 2021 expenses will need to be added to the basis of the rental at the end of the 1031. There were a lot of expenses for use of our equipment and tools, and new tools purchased. Using our tractor, as one example, i t was used for digging a 4'X4', 700' long ditch to supply  electricity and water to the rental, drainage ditches, backfilling the foundation, and landscaping. How do we treat a tractor we already owned that we placed in service in 2021 since there is no Schedule E filed?  Also other expenses for fuel, repairs and parts?  In addition to the usual minor repairs, there was a major breakdown with repair costs of over $7,000.  As for the 2022 expenses do we add them to the basis of the rental up until the time we placed it in service, in August, or as of January 1, 2022?  Thanks for any help.

[Anonymous_ · Accepted solution]

You would be better served to engage a local tax professional for this matter.

See https://taxexperts.naea.org/listing/service/individual-tax-preparation

Regardless, note that the 1031 exchange requirements still apply in the sense that all improvements must be constructed within the 180-day time period.