Fire destroys a commercial/residential rental building. Total insurance settlement is $715,000. Client has paid clean up expenses of about $80,000. He has purchased at another location a rental for 375,000 and plans to build a laundromat at the current location for around 375,000 with equipment being 75,000 of it. The clean up expenses per the insurance recovery papers was 15,000 of the 715,000. Fire took place in Aug 2005-he has until December 2007 to reinvest the proceeds.
1. Does the $80,000 count as reinvestment. I say yes. Clean up necessary to rebuild
even if it is a lot smaller building.
2. Reinvestment of proceeds does not have to be at the same location. You could
reinvest in 10 locations in real estate.
3. Equipment in the laudromat counts-there was furnaces etc in the building, there was
also a poor old CPA. Water damage took everything. All papers in file cabinets were
fine.
4. If he does not get all proceeds reinvested by December, 2007 you amend the 2005
return to record the diference as income in 2005.
What and where am I wrong.
1. Does the $80,000 count as reinvestment. I say yes. Clean up necessary to rebuild
even if it is a lot smaller building.
2. Reinvestment of proceeds does not have to be at the same location. You could
reinvest in 10 locations in real estate.
3. Equipment in the laudromat counts-there was furnaces etc in the building, there was
also a poor old CPA. Water damage took everything. All papers in file cabinets were
fine.
4. If he does not get all proceeds reinvested by December, 2007 you amend the 2005
return to record the diference as income in 2005.
What and where am I wrong.
Comment