Title 26 — Internal Revenue CodeRelease 119-73
§1019 Property on Which Lessee Has Made Improvements
Title 26 › Subtitle Subtitle A— Income Taxes › Chapter 1— NORMAL TAXES AND SURTAXES › Subchapter O— Gain or Loss on Disposition of Property › Part II— BASIS RULES OF GENERAL APPLICATION › § 1019
Summary
If you rent out real estate and your tenant builds improvements on it, the value of those improvements is generally not taxed to you as income. The flip side: your cost basis in the property does not go up or down because of that untaxed value. You cannot claim a higher basis for improvements you never paid for or paid tax on.
Full Legal Text
Title 26, §1019
Internal Revenue Code — Source: USLM XML via OLRC
Neither the basis nor the adjusted basis of any portion of real property shall, in the case of the lessor of such property, be increased or diminished on account of income derived by the lessor in respect of such property and excludable from gross income under section 109 (relating to improvements by lessee on lessor’s property).
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Amendments
2014—Pub. L. 113–295 struck out last sentence which read as follows: “If an amount representing any part of the value of real property attributable to buildings erected or other improvements made by a lessee in respect of such property was included in gross income of the lessor for any taxable year beginning before January 1, 1942, the basis of each portion of such property shall be properly adjusted for the amount so included in gross income.”
Statutory Notes and Related Subsidiaries
Effective Date
of 2014 AmendmentAmendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a
Savings Provision
, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.
Reference
Citations & Metadata
Citation
26 U.S.C. § 1019
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73