How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lev Your Own Question
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
Type Your Tax Question Here...
Lev is online now
A new question is answered every 9 seconds

Working on 2010 Return Depreciation of rental property. My

This answer was rated:

Working on 2010 Return: Depreciation of rental property.
My wife and I own a seashore rental property. In 2009 we paid off the mortgage. Had the old house demolished. New house constructed. Completed in 2010. Started renting in June, 2010.
Can the money used to pay off the old mortgage be counted as part of the basis for the replacement building?

Hi and welcome to Just Answer!

The part of mortgage payment attributable to the interest may be deducted as rental interest expenses. The part attributable to principle is not deductible and it is not added to basis of a new property. The loan when you take it is not your income - so when you pay it off - it is not a deductible expense.

The demolishing is a disposition of the property - it will be written off - reported as a sale with the sale price equal to its remaining basis (if any) will be reported on the form 4797. Remaining basis (if any) will be added to the basis of land.

Demolition expenses are also added to the basis of land.

Please see for reference -

In the case of the demolition of any structure-

(1) no deduction otherwise allowable under this chapter shall be allowed to the owner or lessee of such structure for-

(A) any amount expended for such demolition, or

(B) any loss sustained on account of such demolition; and

(2) amounts described in paragraph (1) shall be treated as properly chargeable to capital account with respect to the land on which the demolished structure was located

The actual cost for the replacement building will be a basis of a new property which you will depreciate going forward.

Let me know if you need any help.

Customer: replied 5 years ago.

My understanding of your reply:

We cannot use the cost of demolition of old building as part of basis for new building.

The cost of demolition is not considered part of the cost of the new building.

Can we claim the cost of the demolition in any way on our 2010 return?

Your understanding is correct. You may not deduct the cost of demolition - see Section 280B above.

The cost of demolition is added to the basis of the land - and will reduce the capital gain when the land is eventually sold.

If the land is not sold - you may not claim any deduction for the cost of demolition.

Sorry if you expected a different answer.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience: Taxes, Immigration, Labor Relations
Lev and 3 other Tax Specialists are ready to help you

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Previous | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA

Meet The Experts:

  • Wallstreet Esq.

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    10 years experience
< Last | Next >
  • Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    10 years experience
  • Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • Richard's Avatar


    Tax Attorney

    Satisfied Customers:

    29 years of experience as a tax, real estate, and business attorney.
  • Robin D.'s Avatar

    Robin D.

    Senior Tax Advisor 4

    Satisfied Customers:

    15years with H & R Block. Divisional leader, Instructor
  • Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
  • jgordosea's Avatar


    Enrolled Agent

    Satisfied Customers:

    I've prepared all types of taxes since 1987.
  • R. Klein, EA's Avatar

    R. Klein, EA

    Enrolled Agent

    Satisfied Customers:

    Over 20 Years experience