Casulaty Gain then sold house - basis?

Technical topics regarding tax preparation.
#1
kathyt  
Posts:
445
Joined:
21-Apr-2014 7:42am
Location:
Lake Charles, LA
Client has a rent house that was heavily hit by Hurricane Laura. His basis is only 16k as it was almost fully depreciated, and insurance paid 152k. He decided that instead of fixing it he just wanted to get out of it - so in 2021 he sold it as-is for 140k. So it's like he sold it twice.

In 2020 he has a casualty gain of 136k (152 insurance less basis 16)
But in 2021 I am making myself confused, does he still have his basis or is the basis now zero? Does he have a gain of 140k or 124k?

I realize this should be really simple but for some reason I am really stuck here.

I
 

#2
Nilodop  
Posts:
18751
Joined:
21-Apr-2014 9:28am
Location:
Pennsylvania
It is "really simple". You don't get to use the basis again.

I assume you simplified your facts by disregarding the land basis.
 

#3
kathyt  
Posts:
445
Joined:
21-Apr-2014 7:42am
Location:
Lake Charles, LA
Yes you assume correctly I realize the land basis is still there for the sale. I didn't think you could use the house basis twice but I really overthought it and got myself quite confused. As always, thank you for your help.
 


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