Expenses incurred by residential rental property owner after tenant has moved out and before selling property

[jskouberdis]

Hello community.  I hope everyone is having many happy returns this year.  I have a question regarding a rental property client of mine.  This client had his property rented from 1/1/23-8/31/23.  The tenant moved out in the end of August.  They left the place a mess and my client incurred $14,000 of expenses from 9/1/23-12/31/23 to fix it up so he could sell the property.  He sold the property in January - 2024.  I know that since the property was not available for rent the last four months of 2023 while the repairs were going on he cannot deduct these expenses in 2023.  From my research these repair expenses should be capitalized.  The problem I have with that is when the sale takes place the proceeds that I allocate to the improvements would be short term capital gains since the improvements would only be 1 to 4 months old.  I am leaning on taking these expenses as an addition to selling expenses on the sale so everything can be long term in nature.  I am asking the community what is your opinion on this.

Thanks,

John Skouberdis

[qbteachmt]

"A mess" and "fix it up" are two different types of expenditure. Clean up or improvement or some of each?

[darleneb]

Yes, I would treat those expenses the same way.  " A fixed up expense for sale of property"

[jskouberdis]

So you would treat it as a selling expense?

[jskouberdis]

So you would treat these expenses as selling expenses.

[darleneb · Accepted solution]

Yes I would ( expense of sale )