Condo Association Management Blog

Good Morning: 
 
No advice in an online forum can replace the counsel of a good accountant. Go get an opinion of a tax preparer so that you have a professional opinion on the deductibility of the expenses. 
 
Now, my laymen's understanding is that reserves would not be deductible or useful in adding to the cost basis. What could, I think, be used would be your portion of any capital improvements. For example, if your community added new playground equipment (versus replacing existing equipment), added speed bumps that weren't there previously, or any other item that you all added to the community which wasn't previously there. 97% of the time, you would definitely know about these because they tend to be big expenses. Other items that can be added, in my non-tax preparing personal opinion, are expenses you paid directly to improve the unit or in the cost of acquisition outside of customary closing costs. There are certain rare instances that will cause your cost basis to decrease. Given the implications for your captial gains tax and what the rest of your tax picture looks like, you should take this entire scenario to your tax preparer to see what he or she thinks. 
 
Darron

Allocating an arbitrary percentage of dues to your basis does not sound wise. And as others have noted, I would not do this unless you speak with your tax professional. In fact, unless explicitly allowed by the IRS, I would not recommend you include dues in your basis calculations as they do not impact your individual unit value directly, such as a kitchen or bathroom remodel would impact your value over another condo unit for example.

So, John C 
 
you are saying that the special assessment expenditure cannot be associated with the owner's (or landlord's as unit is a rental) tax write off or basis.Instead of the roof example, if I were to replace all the siding in the condo, special assessment of 13,000 per unit, can that in any percentage be either written off or added to the basis of my unit ? 
 
thanks

If you have your financial statements audited by a CPA (some states require Associations to do so)they may have already prepared a Tax Cost Basis report for the Associations. 
 
 
 
Many times these are based upon either dquare footage or the type of Condo owned if they are similar throughout the Condo (1 BR A Corner, 2 BR A Duplex, etc.) 
 
 
 
What is deemed as an addition to your cost basis is any IMPROVEMENTS to the property. A replacement needs to be considered a replacement to be an addition to cost basis. Repairs and maintenance does not add to your cost basis. 
 
 
 
Hope that helps.