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Single family rental house owned for 20+ years and fully depreciated. Hailstorm last spring necessitated replacement of entire roof. Insurance covered all but $200 of costs (Roofer $5400-5200 Insurance Co). I have read and re-read Form 4684-Casualties and Thefts and Instructions. I'm at a loss on how to complete SECTION B—Part I Lines 20 on. My attempt using TaxACT:

Line 20-adjusted property basis... zero(0)
Line 21-Insurance/reimbursement... $5200
Line 22-If gain (21 > 20 I'm done?

Where is the repair costs considered?

What am I missing?

George
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Single family rental house owned for 20+ years and fully depreciated. Hailstorm last spring necessitated replacement of entire roof. Insurance covered all but $200 of costs (Roofer $5400-5200 Insurance Co). I have read and re-read Form 4684-Casualties and Thefts and Instructions. I'm at a loss on how to complete SECTION B—Part I Lines 20 on.
My attempt using TaxACT:
Line 20-adjusted property basis... zero(0)
Line 21-Insurance/reimbursement... $5200
Line 22-If gain (21 > 20 I'm done?
Where is the repair costs considered?
What am I missing?

================================
I'd just deduct the $200 out-of-pocket as a repair and leave it at that.

Bill
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I agree with Bill. Toss the 4684. Report the net of the repairs and the insurance reimbursement as a repair expense on Schedule E.

--Peter
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geocarw: "Single family rental house owned for 20+ years and fully depreciated. Hailstorm last spring necessitated replacement of entire roof. Insurance covered all but $200 of costs (Roofer $5400-5200 Insurance Co). I have read and re-read Form 4684-Casualties and Thefts and Instructions. I'm at a loss on how to complete SECTION B—Part I Lines 20 on. My attempt using TaxACT:

Line 20-adjusted property basis... zero(0)"


Not a response to you question, but your post causes me to ask how does a SFH ever have a zero basis?

SFH sits on land, worth something (even 20+ years ago), and is not depreciated (as I understand the rules).

Curiously, JAFO
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Not a response to you question, but your post causes me to ask how does a SFH ever have a zero basis?

It can't. Or more correctly, it shouldn't. But since we have to deal with depreciation that was allowed or allowable, if the depreciation [incorrectly] allowed equals the original cost, the basis will be zero.

There's also the issue of timing. MACRS started in 1987. And I think that residential real estate has always been 27.5 year property. Therefore, this year - 2013 - would be the final year of depreciation for residential real estate placed in service in 1987.

--Peter
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Line 20-adjusted property basis... zero(0)"

Not a response to you question, but your post causes me to ask how does a SFH ever have a zero basis?

SFH sits on land, worth something (even 20+ years ago), and is not depreciated (as I understand the rules).

Curiously, JAFO


My understanding... the value of land is not included in the basis of rental property therefore not depreciated. For tax purposes, when fully depreciated, there is no property basis, that's not to say there is no value. In fact there will come a time when sold, capital gains tax will surely want the full value.

I wish the county assessor would take this into consideration and recognize only the land value for RE tax purposes. :-)

George
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I'd just deduct the $200 out-of-pocket as a repair and leave it at that.

Thank you! That is exactly the response I was looking for.

George
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Not a response to you question, but your post causes me to ask how does a SFH ever have a zero basis?

It can't. Or more correctly, it shouldn't. But since we have to deal with depreciation that was allowed or allowable, if the depreciation [incorrectly] allowed equals the original cost, the basis will be zero.

There's also the issue of timing. MACRS started in 1987. And I think that residential real estate has always been 27.5 year property. Therefore, this year - 2013 - would be the final year of depreciation for residential real estate placed in service in 1987.


Now you have got me wondering if I did the depreciation correctly. In this case the rental was placed in service in 1984 and depreciated using ACRS? 20 year S/L MM in effect at that time until fully depreciated in 2004. Yes there were improvements made in later years and they are being depreciated using the MACRS 27.5 S/L MM. Are you saying the current value of the improvements is the property basis to use on Form 4684?

Thanks for your concurrence to chalk the out of pocket expense to repairs.

George
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Now you have got me wondering if I did the depreciation correctly. In this case the rental was placed in service in 1984 and depreciated using ACRS? 20 year S/L MM in effect at that time until fully depreciated in 2004.

OK. You pre-date MACRS and were under ARCS. IIRC (and I might not, as that was quite a while ago), there were several flavors of ACRS depreciation for real estate. 15, 18, and 19 year schedules come to mind. But at any rate, they were all considerably shorter than the current 27.5 years, so it makes sense that the property is fully depreciated at this point.

Yes there were improvements made in later years and they are being depreciated using the MACRS 27.5 S/L MM. Are you saying the current value of the improvements is the property basis to use on Form 4684?

Yes. Your current basis in the property should be the land value plus any remaining basis in later improvements. That is what you'd use to figure your gain if you were to sell the property.

Of course, we've already determined that Form 4684 isn't applicable in this case. But if you ever did need it for some other event you would include the improvements and land value in your basis.

--Peter
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Now you have got me wondering if I did the depreciation correctly. In this case the rental was placed in service in 1984 and depreciated using ACRS? 20 year S/L MM in effect at that time until fully depreciated in 2004.

OK. You pre-date MACRS and were under ARCS. IIRC (and I might not, as that was quite a while ago), there were several flavors of ACRS depreciation for real estate. 15, 18, and 19 year schedules come to mind. But at any rate, they were all considerably shorter than the current 27.5 years, so it makes sense that the property is fully depreciated at this point.

Yes there were improvements made in later years and they are being depreciated using the MACRS 27.5 S/L MM. Are you saying the current value of the improvements is the property basis to use on Form 4684?

Yes. Your current basis in the property should be the land value plus any remaining basis in later improvements. That is what you'd use to figure your gain if you were to sell the property.

Of course, we've already determined that Form 4684 isn't applicable in this case. But if you ever did need it for some other event you would include the improvements and land value in your basis.


Peter, thank you very much for your reply and clarification of land value in property basis.

George
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