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Postpone Gain on Business Casualty Loss

Kevin1
Level 2

Fire loss of rental property.  Insurance settlement = assessed loss of value, however there would be a gain because the house was already fully depreciated.   Adjusted basis is zero.  Half of insurance money was used to rebuild, half to pay off the  mortgage on the property.    Does only half the settlement work work to postpone recognition of gain?   

 

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IRonMaN
Level 15

If only half was used to rebuild, only half gets the deferral treatment.

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)

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Kevin1
Level 2

I am thinking the amount paid on the mortgage has to be recognized?

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Just-Lisa-Now-
Level 15
Level 15

I think youre right, but this is NOT my area of expertise at all. Hopefully this post will bump back to the top of the list and someone with more experience will add some more thoughts.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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IRonMaN
Level 15

If only half was used to rebuild, only half gets the deferral treatment.

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)

View solution in original post