I wanted to make sure I'm not forgetting some thing here.
Client has a rental property that was damaged in 2020. Insurance company paid him 63,336. Basis in the property is appr 136K.
He did not spend the insurance monies in 2020. He is planning to do the repairs this year.
I reduced the basis in the property for 2020 and have less depreciation. I would then add to the basis in 2021 any repairs he did.
The other option would be to show the insurance proceeds as a liability at the end of 2020 and adjust the basis in 2021 when the insurance money is spent. Not sure if the 2nd option is possible?
Thanks