For example, assume you pay $1,000 in insurance on a piece of raw land.  Further assume your adjusted gross income (AGI) is $100,000.  The insurance expense is deductible as a miscellaneous itemized deduction.  However those deductions must exceed 2% of your AGI to provide you a tax benefit.  In this care 2% of the $100,000 AGI s $2,000, so expensing the $1,000 will not provide you with any tax benefit since it is below the $2,000 floor.  If you had no other miscellaneous deductions you would be wise to make an election to capitalize the costs and add them to the cost basis of your land instead of currently deducting them.

Please call us if you have any questions about this election.