A taxpayer who owns unimproved and unproductive real estate can elect to capitalize annual taxes, interest on a mortgage, and other carrying charges.
- The election must be made annually.
- The election requires a statement in the taxpayer's return describing the property and the expenses to which the election applies.
- If the property produces income in a given year, the election isn't available.
See IRC Regulation 1.266-1, Capitalize Taxes & Carrying Charges Election for more information.