During 2018 and 2019, Danny pays property taxes of $3,500 each year on a piece of land. During 2018, the land is vacant and unproductive. In 2019, Danny uses the land as a parking lot and generates $16,000 in income. Which of the following is true regarding the property taxes?
A) Capitalize $3,500 each year.
B) Deduct $3,500 each year.
C) Capitalize $3,500 in 2018 and deduct $3,500 in 2019.
D) Either B or C is acceptable.
D) Either B or C is acceptable.
A taxpayer may elect to capitalize the expenses on unimproved and unproductive real estate each year. Therefore, Danny may either capitalize or deduct the $3,500 in 2018 but he must deduct the $3,500 in 2019.
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