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Partial Asset Disposition - Replacement Cost

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    Partial Asset Disposition - Replacement Cost

    One method used for partial dispositions requires us to determine the replacement cost.

    For example - A tornado damaged roof

    Divide the replacement cost of the disposed asset by the replacement cost of the entire asset.
    The disposed asset is say $25,000.
    What method do you use for the cost of the entire asset.

    The cost to build a home in Virginia is much different than in California.
    I located this site http://www.home-cost.com/construction-cost-per-sf.html

    Would like to find a second source.

    Thanks,
    Mike

    #2
    Is there a reason why you don't take the actual replacement cost and do the reverse CPI thingy?

    Comment


      #3
      Originally posted by TaxGuyBill View Post
      Is there a reason why you don't take the actual replacement cost and do the reverse CPI thingy?
      Using the Producer Price Index for Final Demand is only allowed for restorations. (Pg 11 link below)
      When there is a Betterment or Adapation you must use the Replacement Cost Method.



      In the example I used (roof damaged by a tornado), it would possibly be a restoration.
      But what about a rental kitchen rehab project where there are upgrades installed?
      Or a roof replacement that entails structural replacement?

      Thanks!!

      Comment


        #4
        Ah, I forgot about that. I seldom encounter such things, so I 'blew it off'. :-)

        I also have a back-up: I have a friend who is a general contractor/designer/architect that I could give me numbers if I really needed it. Unfortunately, that doesn't do you any good. :-(

        Sorry, I guess I can't help you there.

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