Commercial Rental and Intangible Assets

After reading several topics on the TA, I am still unclear on this.
Is a commercial rental considered a trade or business? I have some start up cost that I would like to amortize under CS 195. Things like soil evaluation, attorney fees, and survey's.

The commercial rental purchase has 2 units. One has been placed in service the other is under construction. The problem I have is I am unsure of what to do with the property taxes paid and the loan interest paid (to an unrelated party). Can I write both of these things off as an expense, even thou one unit is not rented out? Or do I have to capitalize on half of them.

Your help is most appreciated.

http://www.taxalmanac.org/index.php/Dis ... ced_in_use

Start here.

But there's a lot of things in your post you'll have to contend with.

Soil evaluation and surveys for specific properties are inherently facilitative amounts under reg section 1.263(a)-2(f)(2)(ii).

Thank You Both For Your Suggestions. I found them very use full. I have been reading for some time and have come up to some conclusions. As follows.

1) Commercial Rental Property is NOT an active trade or business. Therefore CS 195 is not available for this type of business.
2) Soil evaluation, attorney fees, survey's and HVAC units (structural component) all have to be booked as separate assets and depreciated over the same time frame as the commercial building structure. 39 years.

Not to the taxpayer advantage but it is what it is.

1) Commercial Rental Property is NOT an active trade or business. Therefore CS 195 is not available for this type of business.

I think more often than not a commercial rental property is a trade or business.

When is a commercial rental not a trade or business?

I believe a long term triple net lease is not a trade or business.

A building owned by a foreign person and managed by a manager in the US was not a trade or business to the nonresident alien.

Why do you think you're commercial rental is not a trade or business?

Well, that's really not what Junky said.

In the other link, Weiss cited the Senate report on the 195 issue, so take it for what it's worth.

Just to clarify, in regards to CS 195 and rental property. Rental properties are not a trade or business when it comes to CS 195. Not to say they are not a trade or business, but they are not a trade or business when it comes to CS 195.

"Is a commercial rental a trade or business?"

A really simple yes-or-no question such as that should be easy to answer.
Just look up the definition of "trade or business" and
see if the facts of your commercial rental satisfy that definition, then
go to the refrigpbrerator and get a beer and then
go to the refrigpbrerator and get a beer and then
go to the refrigpbrerator and get a beer and then
look up the definition of "trade or business" again...

Those are regular and continuous trips to the pbrerator.

Here's another excerpt from the Senate report:

IN GENERAL, THE OPERATION OF AN APARTMENT COMPLEX, AN OFFICE BUILDING, OR A SHOPPING CENTER WOULD CONSTITUTE AN ACTIVE TRADE OR BUSINESS.

As it's used in this specific context, does the word "active" mean "non-passive", or does it mean something else, or is it **undefined**?

This may be a trick question.

The Senate Report was in relation to Sec 195.

Which means it predates the active-passive distinction.

The problem I have is I am unsure of what to do with the property taxes paid and the loan interest paid

Construction period interest and taxes should be capitalized into the basis in the property until available for rent. Apply this rule on a unit by unit basis.

If the attorney fees relate to the set up of the entity (LLC, etc) I would treat as organizational costs.