Q.
The expenses incurred initially in preparing the real property for its first tenant - initial expense, is sometimes a substantial amount. Can this expense be deducted from the rental income eventually collected from letting the real property?
A.
As there is no tenancy at the time, the production is zero. Only expenses that is related to the production of income is calculated, and not the expenses that is unrelated. Therefore, it is imperative to first rent out the property and later on due to demand from the tenant, thereafter incur the expenses in relation to the needs of the tenant (who pays the rental).
Ref:
INCOME FROM LETTING OF REAL PROPERTY
Public Ruling No. 4/2011 Date of Issue: 10 March 2011
Public Ruling No. 4/2011 Date of Issue: 10 March 2011