A taxpayer who owns unimproved and unproductive real estate can elect to capitalize annual taxes, interest on a mortgage, and other carrying charges.
- The election must be made annually.
- The election requires a statement in the taxpayer's return describing the property and the expenses to which the election applies.
- If the property produces income in a given year, the election isn't available.
To include this election in the Individual module
- Go to Screen 46, Elections.
- Scroll down to Election to Capitalize Taxes & Carrying Charges section.
- Check the box Capitalize taxes and carrying charges [266].
- Complete the other 3 inputs in this section.
- To create multiple elections, click Add in the left navigation panel and repeat step 2 through 4.
To include this election in the Partnership module
- Go to Screen 33, Elections.
- Select Election 1 in the left-hand navigation menu.
- Scroll down to Election to Capitalize Taxes & Carrying Charges section.
- Check the box Capitalize taxes and Carrying charges [266].
- Complete the other 3 inputs in this section.
- To create multiple elections, click Add in the left navigation panel and repeat step 2 through 4.
To include this election in the S-Corp module
- Go to Screen 38, Elections.
- Select Election 1 in the left-hand navigation menu.
- Scroll down to Election to Capitalize Taxes & Carrying Charges section.
- Check the box Capitalize taxes and Carrying charges [266].
- Complete the other 3 inputs in this section.
- To create multiple elections, click Add in the left navigation panel and repeat step 2 through 4.
To include this election in the Corporate module
- Go to Screen 41, Elections.
- Select Election 1 in the left-hand navigation menu.
- Scroll down to Election to Capitalize Taxes & Carrying Charges section.
- Check the box Capitalize taxes and Carrying charges [266].
- Complete the other 3 inputs in this section.
- To create multiple elections, click Add in the left navigation panel and repeat step 2 through 4.
E-filing and viewing the election
In all modules, the election is included with the e-filed return and listed in the e-file summary for verification.
To view the election:
- Go to the Forms tab.
- Select Elections from the Form list in the left navigation panel.
See IRC Regulation 1.266-1, Capitalize Taxes & Carrying Charges Election for more information.
