Partnership with high expenses but no income

[gianni1212]

Hey everyone, I have a client who started a partnership to build and sell a house. They opened the partnership last year and spent considerable amounts of money to build the house, but did not sell the house. They will be selling the house in 2013. Should I be filling a partnership return with zero income and expenses for last year and just add all expenses to the basis of the house to be deducted on the return when they sell the house? Thanks a lot for any input.

[michaelmars]

if building the house, the costs go to inventory

[kcjenkins]

There may well be some general administrative expenses that could be deducted this year, but the costs that go into the property must be capitalized. There are some that you have the option of making an election for capitalizing or of deducting now.

[michaelmars]

There may well be some general administrative expenses that could be deducted this year, but the costs that go into the property must be capitalized. There are some that you have the option of making an election for capitalizing or of deducting now.

careful with the word "capitalized" because you are right but many might think that it gets depreciated. if they are building houses then they are manufacturers and you have to add 263A costs.

[gianni1212]

thanks to all for the help!