Loss on demolition of a rental property

[LCP]

Taxpayer had two small rental houses on land adjacent to her home.

She got sick of dealing with and looking at them so she tore them down ........... does she have a current year loss?

If you scrap personal property you have a taxable event.

[ed spencer]

Check out TTB

p 8-7 Demolition expenses must be added to the cost basis of the land. Bummer

[LCP]

p 8-7 Demolition expenses must be added to the cost basis of the land. Bummer

Thanks! Makes sense since the property hasn't been scrapped....just the improvements.

[Burke]

Yes. I had one who did this and built new office bldgs on the site. Wanted to add it to the depreciation schedule. Nope, could not do. Actually, now that I think about it, he originally wanted to deduct in full as an expense. Couldn't do that either.

[Roland Slugg]

In addition to the demolition costs, the IRC says that the remaining basis in the building must also be transferred to and added to the basis if the land. (Code §280(B)(1) and (2) However, in at least one case the Tax Court held that a loss sustained before a building's demolition as a result of () an extraordinary obsolescence of the building isn't treated as sustained on account of the demolition.

I don't have a case cite, but if this situation may apply to your client, and the remaining basis of the buildings is significant, it may be worthwhile for you or the client's tax attorney to find the case and read it.

[Snaggletooth]

Tsunami

() an extraordinary obsolescence of the building .

You mean like a tsunami?

Are there circumstances where there can be an "extraordinary obsolescence" of a building but NOT due to a casualty? A condemnation for a highway maybe?

[Snaggletooth]

Land or Building?

the remaining basis in the building must also be transferred to and added to the basis of the land. (Code §280(B)(1) and (2)

Sluggo does this mean added to the basis of the LAND or to the subsequent BUILDING?? Significant difference, as one is depreciable and the other isn't...