Can soft costs be deducted immediately prior to a building be placed into service?

A recent question was proposed to our Engineering Group:  Is there any opportunity to deduct soft costs related to  constructing a building such as architect, engineering, impact fees and permits, etc.  prior to the building being placed into service.

Answer:  Unfortunately, all of the listed costs will have to be capitalized per IRS Code Sec 263 and 263A.  See also, Von-Lusk v. Commissioner, 104 TC 207.  Under Treas. Reg.  1.167(a)-10b, depreciation of an asset shall begin when the asset is placed in service.  Property is placed in service when placed in a condition or state of readiness and available for a specifically assigned function.  See Treas. Reg.  1.167(a)-11(e)(1)(i).  Therefore, depreciation will not begin until the building is substantially complete and available for use.  At that point, all soft costs can be depreciated.