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Capitalized Construction Costs

  • 1.  Capitalized Construction Costs

    Posted 05-31-2019 12:51
    Hello all.  I hope everyone is nice and relaxed now several weeks post tax season.

    I have a new client who is looking to demo a building and I have a couple of questions regarding what pre-construction costs can/should be capitalized?

    The client owns commercial property and started the process to raze the existing building in 2014 so that a new structure could be built.  Zoning approval was originally granted in 2014, and then re-granted in 2017 due to a change in design of the new building. The building was razed in late 2017.  I am trying to determine what costs outside of permits and actual demo costs can/should be capitalized:

    1) Real Estate taxes at any time during the process?
    2) Asbestos remediation prior to demo, I assume yes?
    3) Interest on loans to carry the property during the process as well as a mortgage taken prior to the conversion process for the maintenance of the building?
    4) What happens with the remaining book value of the building which was being depreciated? I assume it is capitalized?

    Are there any other costs that we can reasonably capitalize for the period prior to or after the demolition?
    Paul J. Sadej, Jr. CPA
    Paul J. Sadej, Jr., CPA PC
    1846 White Street
    Bellmore, NY 11710
    Tel. 516-409-4102 x10
    Fax 888-409-4104

    Please Note: HD Vest policy requires that all investment-related correspondence be sent or copied to my HD Vest email address ( for archiving and supervisory review.

  • 2.  RE: Capitalized Construction Costs

    Posted 06-01-2019 15:07
    All the "deconstruction" costs will be a non depreciable addition to the land; I believe that would cover engineering, interest & property taxes as well, up to the point of beginning construction on the new.

    Robert Gaines CPA
    Temple TX

  • 3.  RE: Capitalized Construction Costs

    Posted 06-02-2019 15:14
    Another accountant mentioned to me the under the new tax act,  real estate taxes and construction interest can now be expensed instead of capitalized during construction. Does anyone else have any knowledge of this?

    Michael Weitzman
    Jericho NY