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Updated over 7 years ago,
In-Service or Pre-In Service for Repair Expense vs Capitalization
Rental real estate requires capitalization of most expenses prior to being placed "in-service" (offered for rent). Here is a twist on the topic of in service. Let's say I purchase a property and the seller holds over for a time paying rent on the property. I own the property and am receiving rent --- maybe only a day or a week, but it is serving its purpose, however, following the moveout of the former owner I have weeks or months of make ready. Was the property in service because it could be occupied and I received rental income? Or since it was not advertised for rent and the "renter" is the former owner who has no intention of staying are the repairs "pre in service" and thus have to be capitalized? Can't find an answer anywhere.