TCJA and Construction Period Interest, Taxes, Insurance, HOA

Technical topics regarding tax preparation.
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SL111  
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9-Aug-2019 5:19pm
Location:
North Hollywood
Client is invested in two LLCs. Each LLC purchased and is renovating a single-family residence for eventual sale (each LLC was formed only for a single project and has a few other investors). LLC 1 started in 2017 and completed construction in 2019 (house is currently listed for sale). LLC 2 began operations in 2018 in is still in construction phase. Both are on the cash basis. In 2017 we capitalized interest, taxes and almost everything else into the building. Both 2018 returns are currently on extension, and neither client has generated any material revenue (separately or in aggregate with related entities). My questions are:

1) Does the TCJA now allow deducting interest and taxes for both projects in 2018, meaning we are not required to capitalize these costs into the building like in 2017 under 263A? I was not sure if 263A was the only reason we had to capitalize these before, or if there is some sort of start-up or other reason.

2) If allowed to deduct, for LLC 1 does that mean I would have to file Form 3115 to change from using 263A to no longer using 263A, since this would be a change in accounting method?

3) If allowed to deduct, for LLC 2 can I just deduct the interest, taxes and insurance since 2018 is the first year tax return for LLC 2. In other words, for 2018 there is no “election out” of 263A if they were never in 263A to begin with?

Thank you in advance for any help. I did review a prior post that was helpful but I’m still uncertain.
 

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