A real estate developer is a taxpayer who improves and/or subdivides real estate over a period of time. In general deductions, including depreciation, on property under development cannot be taken until the property has been developed and placed into active service.
This can mean that the investor is expending funds to improve property but does not obtain any tax write-offs for those expenditures until later years. Additionally, under what are known as the Uniform Capitalization rules of the tax code, the taxpayer may be required to additionally capitalize a portion of their overhead expenses, and thus not be allowed a current deduction until the property is placed into service.
The real estate developer rules can be a trap for the unwary, especially when a taxpayer is counting on, or is otherwise dependent on, current tax benefits to help fund their real estate investing activities.
The Uniform Capitalization rules of the tax code are often not well understood or applied, even by tax practitioners.
We have a solid understanding of them, and can assist.
