Special Assessment and Tax

I was wondering what the tax implications are of a special assessment as it relates to homeowners. My HOA (in San Diego, CA) recently issued $95K in assessments over a two year period. As a homeowner am I able to count those assessments towards improvements and as an exclusion when I sell? For example, if I paid 500K and sold for 700K, assuming no other improvements, would my taxable gains be 105k?

Long story short, the property is about 30 years old and I personally believe that it was grossly mismanaged for a number of years. A combination of inadequate funding on a monthly basis, reactive repairs and planning as well as a touch of misappropriation of funds. Suffice to say, no one was happy about the assessment.

Maybe. There is an IRS revenue ruling that lets condominium owners increase their tax basis for payments that result in capital improvements to the condominium. So a special assessment for balcony refurbishment may qualify, while a special assessment for flood insurance would not. When I served on the board of the condominium, I distributed a copy of the ruling to owners and advised that they should provide to their tax advisor to see if it would result in tax savings when they sold their unit. We also tasked the CPA firm that prepared our annual statements, with tracking and posting capital improvements for each year as part of the financial statements. We tried to avoid having the board provide any tax advice on this matter.

Maryland CPA