I set up an LLC in 2008 to develop a 54-home subdivision, with the LLC taxed as a pass-through partnership. Although I’m in the construction industry, this was my first development project. Unfortunately, I had to put the project on hold after the real estate market crash, and the local economy subsequently fell into a literal depression, still with no end in sight.
My project was part of a larger planned community, with road and water districts that would have required 8-figure bonding. Due to market conditions, the county put the district engineering work on hold in 2010 at the 60% milestone, then late last year they officially killed the district, without which any subdivision development cannot proceed. So I need to unwind the partnership.
Since 2008, I capitalized around $50k in expenses, mostly real estate taxes and engineering work. I borrowed $600k to purchase the land, and deducted interest payments on my partnership returns per Section 263A(f). There’s no market for the land now, so I’ll have to continue to hold it indefinitely. Fortunately, I was able to retire the loans last year.
I’ve always handled my own returns, but ending a partnership is beyond my experience. I filed for an automatic extension for 2018, so I need to file the final partnership return in 9 days! Yeah, I know. I should have dealt with this sooner. But I’ve been ‘burning on both ends’ on an unrelated project for the past year.
I obviously can’t take a loss on the land without selling it, which I can’t do. But I’m wondering if I can take a loss for the $50k in capitalized expenses? Is there a particular publication that deals with this topic?
This topic was modified 2 years ago by irc_nausea.