Rehab costs - add to basis or take loss that year?

[Matt John]

When you purchase a property and immediately rehab before renting out, do you add the cost of the rehab to your basis of the property, or do you take a loss that year? Does it make a difference if you have a bunch of small receipts from the rehab vs one large bill from a GC?

I spent 7k on a rehab, which my CPA added to losses for this year. Unfortunately there is a Passive Activity Loss Limitation (form 8582) and it didn't add anything to the losses I was already taking because of the limitation. I feel like my CPA should've added that 7k to the basis so I could at least depreciate it over 27.5 years and also so I don't pay taxes on gains on that amount if I sell before 27.5 years...