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Real Estate Expenses after Acquisition of Property

March 13, 2018

Tax Question:

What is the tax treatment of real estate expenses after a property is acquired?


After a property is purchased, there is generally a time period that a property is held before it is developed. Common expenses that are incurred are property taxes and interest. Other expenses incurred can be classified as an operating expense, added to inventory cost or capitalized for tax purposes.


Property taxes and interest on vacant land are generally capitalized or added to the cost of inventory for real estate. These expenses on vacant land can only be deducted in the same tax year if there is property income received and the corporation is not in the business of development. Representation costs and site investigation costs would be deductible in the same tax year that the expenditures were paid.

There are various other expenses that a corporation may incur before the property is developed or earns income. These expenses could be considered deductible expenses or improvements that are capitalized. If there are repairs incurred to maintain the property such as normal wear and tear, then these expenses would be deductible. If there are significant repairs that are incurred as the property was purchased in poor condition, then these repairs may be considered capital in nature and added to the cost of the property. If there is equipment purchased for the property, then it may be classified as an expense or capital cost. For example, if a new fridge was purchased for a building to replace an old fridge, then it should be deductible as a repairs and maintenance expense. If additional appliances were purchased that were non-existent before, then these would be capitalized.

If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.

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