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I have an issue with a rental property destroyed by fire,

Customer Question
I have an issue...

I have an issue with a rental property destroyed by fire, total loss, postponed a gain and purchased replacement property. Can you help me with this?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

I have attached statement to my tax return last year and this explain everything. Can I attach the file here?

Accountant's Assistant: Is there anything else the Accountant should be aware of?

This letter is our statement for postponing a gain from a casualty or theft.
On 07/19/2016 we had a fire at one of our rental houses with address***** Schenectady, NY, 12303. The rental property was a total loss. The insurance company was Liberty Mutual.
We have chosen to replace the property with another rental property to be able to receive also the recoverable depreciation from the insurance company.Per IRS publication 547 “To postpone reporting your gain, you must buy replacement property within a specified period of time The replacement period begins on the date your property was damaged, destroyed, or stolen. The replacement period ends 2 years after the close of the first tax year in which any part of your gain is realized.”We purchased the replacement property January 30th, 2017.Per IRS publication 547, We have to attach a statement to the tax return. This statement should include the following
The date and details of the casualty or theft. -
The insurance or other reimbursement you received from the casualty or theft.
How you figured the gain.Replacement property acquired before return filed. If you acquire replacement property before you file your return for the year you have the gain, your statement should also include detailed information about all of the following.
The replacement property.
The postponed gain.
The basis adjustment that reflects the postponed gain.
Any gain you are reporting as income.
Attached to the statement is the original deed for the purchase of the lost property with address***** Schenectady, NY, 12303, dated 06/16/2014 and purchase price $13,500.
Also attached is our Depreciation Summary sheet showing 4 activities and the accumulated depreciation taken for these activities up to the date of the fire 07/19/16.
- 6th Ave Rental house -Basis S12,610, total depreciation taken - $765, Left – $11,845
- 6th Ave Gas Range -Basis $485, total depreciation taken - $343, Left - $142
- 6th Ave Refrigerator -Basis $942, total depreciation taken - $667, Left -$275
- 6th Ave Improvements -Basis $12,523, total depreciation taken - $758, Left -$11,765The 6th Ave Rental house and 6th Ave Improvements, both have 25 years left to depreciate and total amount left to depreciate $11,845 + $11,765 = $23,610. This is our adjusted property base.
The insurance reimbursement (see attached statement copy from Liberty Mutual) was $647.75 + $246,351.28 to a total of $246,999.03.
The insurance proceeds covered the remaining value of the refrigerator and the gas range $142 + $275, total of $417, leaving the remaining balance $246,999.03 - $417.00 at $246,582.03.
When we substract from the insurance proceeds left $246,582.03 the adjusted property bases of $23,610, we have a gain of 222,972.03 which we choose to postpone.On 01/30/2017 we purchased a property with address 24 Debbie Marie Ct, Niskayuna, NY, 12309 with purchase price $311,000.00. We chose this as our replacement property.

Submitted: 3 months ago.Category: Tax
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Customer reply replied 3 months ago
My issue now is how to report the transaction on my tax return 2017.
In 2016 I was told that I have to prepare just the Statement, but now, I have to report the full transaction.
I also sold the land under the house that was lost in March 2017, so I have to report the sale this year too. The base of the land was $2,025 and the sale price was $891
What will be my new house's base? (the old house?)
How many more years I will have to depreciate the replacement house? (25? or I have to start again 27.5?)
Answered in 11 hours by:
3/27/2018
Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 3 months ago
ABC Accounting Group
ABC Accounting Group, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 889
Experience: Business Consultant/Accounting Manager
Verified

Hi. I can help you.

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Customer reply replied 3 months ago
Ok, I assume you can. I have posted my problem above.
Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 3 months ago

Your new basis represents the value of your replacement property minus whatever gain is deferred, or plus the total unrecognized loss should this be the case instead.

311,000 less 222,972.

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Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 3 months ago

It would be at 27.5 years.

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Customer reply replied 3 months ago
I disagree about the Base. The price 311,000 includes also the land and should be excluded. I do not know how to enter the whole transaction into the tax software, but seems you can't help with this
Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 3 months ago

I was going to add to this, but will opt out.

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