Rental Property Special Assessments

[AnmarieA]

I have a partnership that owns condo's in FL that were damaged by Hurricane Helene and Milton hence they had to pay out of pocket expenses to a contractor and special assessments paid by them in 2024 as follows:

- Flood damage special assessment to remedy the common areas $1,390/per unit

- Common area pool was completely damaged and needs replacement $1,191/per unit

- Paid a contractor to rebuild one unit's walls due to the hurricane damage $10,263 + $500 License fee for the work. Due to delays in being able to obtain the permits yet the work is still in process and the partnership only paid 1/2 of the amount as a deposit down in 2024 and will pay the balance when the work is completed in 2025. So the unit is not rentable until the work is completed. 

My question is that due to the nature of these expenditures they appear to NOT add any further value to the condos but rather are restoring/preserving them to their current value so such expenditures appear to be deductible in the year paid versus requiring capitalization over the 27.5 years.

Would you agree with my tax treatment of these expenditures?  Thanks for your feedback.

[Terry53029]

You don't say if they are rentals, but it sounds like they are. If the rentals are not available then you can't claim any expense until they are available.

[AnmarieA]

Yes in my title I say they are Rental Property Special Assessments. The rental property is completely shut down during the repair work as the damage was so extensive that it is taking the resort a difficult time getting the permits approved and therefore the work has not begun. Based on your comment you can not take any expense until they are available for rent again, not certain I have heard of this before as they have utilities, RE Taxes and other operating expenses going on while the units awaiting repair. Are you suggesting I show these as deposits on the balance sheet until the work is complete and the units are open for rental? 

[BobKamman]

Business casualty loss, if it is all due to hurricane damage.  A lot of these Florida condos were inadequately maintained and the assessments are to catch up on regular maintenance (deductible) or needed improvements (depreciable) that were ignored by boards for years.  

[AnmarieA]

Thanks for the clarity.