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.
To include this election in the Individual module
- Go to Input Return ⮕ Other ⮕ Elections.
- Select the Other tab.
- Scroll down to Election to Capitalize Taxes & Carrying Charges section.
- Check the box Capitalize taxes and carrying charges [266].
- Complete the other 3 inputs in this section.
- To create multiple elections, click the + at the top of the screen to add a tab.
To include this election in the Partnership module
- Go to Input Return ⮕ Other ⮕ Election.
- Select the Elections in the top right.
- Select the Other tab.
- Scroll down to Election to Capitalize Taxes & Carrying Charges section.
- Check the box Capitalize taxes and carrying charges [266].
- Complete the other 3 inputs in this section.
- To create multiple elections, select the + at the top of the screen to add a tab.
To include this election in the S-Corp module
- Go to Input Return ⮕ Other ⮕ Elections.
- Select Election in the top right of the input screen.
- Select the Other tab.
- Scroll down to Election to Capitalize Taxes & Carrying Charges section.
- Check the box Capitalize taxes and carrying charges [266].
- Complete the other 3 inputs in this section.
- To create multiple elections, click the + at the top of the screen to add a tab.
To include this election in the Corporate module
- Go to Input Return ⮕ Other ⮕ Elections.
- Select Election in the top right of the input screen.
- Select the Other tab.
- Scroll down to Election to Capitalize Taxes & Carrying Charges section.
- Check the box Capitalize taxes and carrying charges [266].
- Complete the other 3 inputs in this section.
- To create multiple elections, click the + at the top of the screen to add a tab.
E-filing and viewing the election
In all modules, the election is included with the e-filed return and listed in the e-file summary for verification.
To view the election:
- Go to Check Return ⮕ Forms.
- Select Elections.
See IRC Regulation 1.266-1, Capitalize Taxes & Carrying Charges Election for more information.
