When do deductible expenses start?

[Angie DeRubeis]

Are cost of legal fees and renovations before LLC is formed deductible expenses?

[Mark Ernst]

Assuming this is in regards to a rental property and fixing it up...Your pre-rental expenses typically add to the cost basis of the property. Say you bought a house for 100k, then you put 50k into it to get it ready for rent. Your adjusted cost basis of the property is 150k. You can't take the 50k or even a portion of it off your taxes as rental; Repairs, Maintenance, etc.. After the property is rented, then costs start to go into the appropriate buckets and become tax deductible. When you sell it, you would pay the difference on net proceeds, based on your adjusted cost-basis. (the 150k, not 100k)

My understanding and have been in this boat, and done taxes myself and this is what I found. You can and should get tax advice from a professional if it matters. 

[Angie DeRubeis]

I guess I have ask a pro, because the issue is I will be making improvements (expenses) BEFORE the LLC is formed. The property is going heirship once established I will form LLC but I am making improvements now to get ready to rent after LLC

[Eliott Elias]

Yes

[Angie DeRubeis]

Thanks Elliot. Are an accountant?

[Henry Clark]

I am not your cpa.   This is not tax advice.  

Who owns what and when.  At what point are expenses being made before legal ownership change.

Disregard the LLC. Key on legal ownership change from the estate to you.

If you make expenditures before you take ownership, this is a gift.   You need to “pay” gift taxes.   They are not deductible or capitalizable since you have no ownership interest.     

It all depends on when ownership switches to you.  

[Linda Weygant]

Quote from @Angie DeRubeis:

Are cost of legal fees and renovations before LLC is formed deductible expenses?

 As with most tax questions, the answer is "it depends".  Generally speaking, these types of deductions are going to be added to depreciable basis, but they can occasionally be at least partially deductible, depending on what you've got going on.

Consulting with a knowledgeable tax pro will get you a more definitive answer.  And even if the answer on this one is NO, then a great tax pro will guide you through the setup on your next purchase so that the answer may be YES!

Best of luck to you.