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Discussion Forum Index --> Tax Questions --> Demolition of rental property
Bobkim (talk|edits) said:
| 12 May 2006
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| I have a client who has rental property in his corporation. He is going to tear down the house and build another on the same property. The book value of the house after depreciation is $300,000. His year end is 6/30/06 and he has a profit from sales of other houses of $250,000. He will tear down the house before 6/30/06 but will not start building until after 7/1/06. Could I write off the $300,000 less what the land is worth against the current profit or do I have to apply it against the cost of the new house. Thank you.
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Foxttron (talk|edits) said:
| 12 May 2006
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| Are you talking about a write off of $300,000 because that is what the book value is today?
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Dennis (talk|edits) said:
| 12 May 2006
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| Unrecovered basis and demolition expense are added to land value. There is no recognized loss.
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Bobkim (talk|edits) said:
| 12 May 2006
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| So would I take the $300,000 basis and demolition costs and add it to the cost of the new house which will be sold? I wanted to write off the remaining depreciation since there was no longer a house to offset this years tax liability. I guess I am out of luck.
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Dennis (talk|edits) said:
| 12 May 2006
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| Luck is just deferred. Client is doing this to make money, no?
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Bobkim (talk|edits) said:
| 12 May 2006
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| True. I guess if you pay alot af tax that means you made alot of money and you should be happy.
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LJACPA (talk|edits) said:
| 13 May 2006
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| This may not fit your issue at all, but we had a similar situation - with a restaurant building - did extensive research on abandonments and determined that we had a case for such. Ended up with a huge write-off - and lots of documentation. Might be worth a look. Might not be.
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