Tax audit of real estate capital gains: Be sure to keep receipts for renovation work!
Last week, the Administrative Court of Appeal in Nancy issued a ruling that underscores the importance of keeping all documentation related to construction work on real estate properties.
In this case, a taxpayer had purchased a property with the intention of dividing it into three lots and then reselling it. Upon resale, he was taxed on the capital gain realized. He had, however, reduced the amount of that capital gain by deducting reconstruction costs.
During the tax audit of the capital gains on the property, he submitted several invoices toadministration to substantiate these expenses. However,administration accept them because the taxpayer failed to provide proof of payment for these invoices. The tax authorities then issued him a tax assessment regarding the capital gains on the property.
In this case, the judges upheld theadministration position, emphasizing the importance of properly retaining both invoices for work performed on a property and proof of payment for those invoices.
If you have a question about the procedures for a tax audit of a capital gain for an individual, please refer to our frequently asked questions on tax audits for individuals.