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Hi Allan,
I bought a run down property late last year for $315 thousand with the intention of turning it into a rental home for long term retirement planning. I had incurred about $60 thousands in material/labour costs, and carrying charges. I had started the 'for rent' process holding open houses and showed the property to prospected renters. I now find it very stressful and I'm considering selling. If it sells for $400 thousands, is my gain $85 thousands or $25 thousands. I can deduct the full expenses of $60 thousands? I keep a log of all of them and have all the receipts/invoices.
Thank you.
Hi Lavie, if the property sells for $400,000, then the gain will be $25,000. Since you are flipping this property, the entire $25,000 gain will be taxable to you and included in your income in the year of sale.
Note: interest charges, property taxes, and utilities cannot be added to the cost of the property.