Discussion:Real Estate Investment Fee Deduction
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Discussion Forum Index --> Tax Questions --> Real Estate Investment Fee Deduction
| 1 February 2007 | |
| I have paid a substantial amount of money ($11,000) to a realator in order to find me good investment properties to purchase. Is this an investment fee that I can deduct?
I have not bought a property yet, and have not made any capital gain which I can offset with this fee. If I can deduct this fee later, would I need to wait until I sell the property and have a capital gain or would I deduct some of it now, and roll over the rest in future years? | |
| February 1, 2007 | |
| 1.) Not currently
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| 1 February 2007 | |
| The real question is whether you are "engaged in the trade or business of home building or land development." Apparently the answer is no, but you are still subject to Sec. 263A on the production costs and carrying costs up to the point of being ready for sale. | |
| 1 February 2007 | |
| Thanks.
One more thing, I have paid my brother (in Dec 2006) who is a realtor about $1200 for his help in purchasing a property (which is still in process). Can I also deduct any monies paid to him one the property is sold? | |
| 1 February 2007 | |
| No I am not "engaged in the trade or business of home building or land development." I am just doing that on the side for investment purposes. I will read up on Sec 263A thanks. | |
| 1 February 2007 | |
| On page 36 of Publication 550
"Investment counsel and advice. You can deduct fees you pay for counsel and advice about investments that produce taxable income. This includes amounts you pay for investment advisory services." So does this mean that the $11,000 that I paid for the service of finding property and advising on whether or not it is a good investment opprotunity would qualify as a deductible expense that I would claim for 2006? | |
| February 1, 2007 | |
| What exactly did you get for the $11,000 you paid the realtor? When does a realtor charge $11,000 when it's not a fee for closing on a property? | |
| 1 February 2007 | |
| The $11,000 was paid as a fee for consultative services in finding property to purchase that would result in a high equity position, which could then be sold back on the market at a higher price to turn a profit. Primarily it was to find foreclosure properties and get them under contract to sell me the house much below market value, thus stiffing the bank out of the equity they would have assummed in the foreclosure. Instead I would assume the equity through paying off the balance on the house plus some extra amount.
This $11,000 is not a fee paid in the process of actual purchase or closing of the house. | |
