Cash for Keys Tax Deductible?

[Aaron Smith]

Hi BPers,

@Joshua Smith and I both recently bought properties and had to pay off tenants with cash for keys agreements. To me, it seems like one could argue that this is a property expense and could be deducted as an expense.

@Brandon Hall you might be more in tune with this. More specific to the DC market, one of the properties had quite a large TOPA payoff to the tenant that occupied it. One of the terms of the TOPA payoff was that the tenant vacate the property, so this served the purpose of cash for keys as well.

Thanks!

Aaron

[Basit Siddiqi]

@Aaron Smith

Are you doing cash for keys to get the tenants out so you can demolish the building or to put the building through extensive rehabilitation?

This might have to be capitalized to get the unit ready for its intended use.