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Commercial property interest deduction

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treehouse39

Junior Member
What is the name of your state (only U.S. law)? West Virginia
Where is the correct place on our tax forms to deduct interest from a commercial property (auto repair garage) that is no longer open for business since a year and a half ago, we are not renting it out, but are still making payments on it? Our place of residence for all of 2008 is West Virginia but our commercial property is in Montana. We did not make any income in Montana last year. Thanks for your ideas about this.
 


tranquility

Senior Member
Why is it "commercial" property? Are you trying to rent it out? Are you using it in your business? (Or, do you believe you will be using it in your business?)

Is the interest an ordinary and necessary expense for doing business?
 

treehouse39

Junior Member
It is an auto repair service station on Main Street. We currently are not using it. We have no plans to rent it out. We may sell it in a few years.

We used it for our business for several years when we lived there and had our business there, but then we moved away. We had deducted the interest in full when we had the business open.

Currently, we live in another state and are starting a "new" business here. But our location now is different, so I'm just wondering what is the proper way to deduct the interest on our service station that is in the other state? We have a 1098 for it.
Thanks.
 

tranquility

Senior Member
We have no plans to rent it out.
Not on Schedule E then.

We currently are not using it.
Not on Schedule C then.

We may sell it in a few years.
May? I guess this isn't investment interest then.

You can't deduct personal interest anywhere on your return.

HOWEVER,
Are you sure you aren't trying to rent it? Or, are you holding the property in the normal course of some business you are operating? Perhaps you are owning the property as an investment?

If so, maybe on form 4952 subject to limitations.
 

treehouse39

Junior Member
Thanks for trying to help. I appreciate it.
I'm not sure what you mean when you ask "are we sure we're not trying to rent it"? We are not trying to rent it out to anybody. We are "buying" it from the seller through an escrow service. We are holding onto the property as an "investment" with plans to sell it in the future.

I just took a look at Form 4952 and its instructions. From the language it uses, I am unsure of whether this is the form we should use or not. Can you shed any light on this of how it might apply in our situation? Would the interest be deductible in full?

I know in the past we deducted the interest on the loan for this property on Schedule C Profit or Loss in Part II Expenses, line 16 Mortgage Interest paid to banks.

We are filing a Schedule C this year for expenses incurred in our new area. Could we put that loan interest expense on this year's schedule C? Or no?
 

tranquility

Senior Member
I suggest you see a tax professional.

From what I guess your situation is, no, the interest will not be currently deductible.

As to the business question:
Are you using it in your business? (Or, do you believe you will be using it in your business?)

Is the interest an ordinary and necessary expense for doing business?
 
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