World Class Mergers & Acquisitions  |  For Companies $5 Million to $100 Million in Revenue

Mergers & Acquisition FAQ – November 2009

Q: I purchased rental property and there were a lot of costs involved.  What costs am I allowed to deduct?

A: You are allowed to deduct interest and real estate taxes, for the most part.  Other fees such as closing costs and settlement fees are not deductible.  They are simply added to the purchase cost of the property.  When the property is sold, these costs will reduce the gains if any.

Q: Due to the conditions that exist in the real estate market, the sale of my rental property netted a loss.  How do I report the sale of a loss on rental property?

A: The loss resulting from the sale of rental property is reported on Form 4797.  On the positive side, it is taken as a loss against ordinary taxes and not a capital loss.

Q: If I make repairs or improvements to my rental property, are those alterations subject to an immediate deduction or are they more likely to be depreciated over time?

A: If a major alteration such as a new roof is added, floors are installed or otherwise an alteration that substantially improves the value and adds to the lifespan of the asset, the improvement is subject to depreciation as part of the structure subject to 27.5 years, straight line depreciation.  Smaller repairs, such as painting, repairing a window, or replacing one piece of siding can be deducted currently.

By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors