TaxProTalk.com

So client of mine bought a house across the country, quit his job and moved his family with the intention of flipping that house.

They were there 4 months improved it and sold it and then moved to a 3rd state, where they started a new business - the flip was a one and done situation.

They provided me with moving expenses and I told them moving expenses aren't deductible.

But after some thought, I'm pretty sure you add travel costs to the basis of an investment property. Even so, does the fact they travelled across country and took all their belongings make any difference? These were costs that were necessary in order to make the investment happen.

So what expenses can I allow them to claim - Nothing? Travel cost for a single trip to the home and then from it? Or can we include the full cost - hiring movers, etc? I assume whatever we claim needs to be added to the basis of the property.

Was it a "live in" flip? If it was it's not an investment property for tax purposes. It's a residence. We're just debating semantics with the client.

Even if it's not, it's a stretch calling these anything other than personal moving costs. Nondeductible.

That's a good point, and yes, they lived in the house.

And I imagine they would like to use the Sec. 121 exclusion (full or partial) if eligible. That tells you all you need to know.

No, they planned on a large gain, just trying to minimize it. I have clients like that, but in this case they are trying to do the right thing and just read that they could include travel expense - as they could to an across town fixer upper worksite. And I suppose a case could be made if it wasn't a live in, across the country travel could be deductible, though not likely to the extent they were hoping.

Thanks for the direction.