Hurricane Sandy Question

[Snaggletooth]

Six families have sickened themselves with the tax-happy governments in Northeast States, and have settled in my home town, where they can remain close friends and socialize in an otherwise culture-hostile place. All six are now my clients - I call them the "Long Island Connection."

One of them kept the house and has been renting it out since moving to Tennessee. The house in Babylon NY faces the Atlantic Ocean, and although standing, will have to undergo massive renovation. There have been no tenants since October and will most likely not have any more until house is renovated and sold - this appears to be the only economic solution for my client.

Client is older, and bought house in early 1960s for appx 1/10th of its value before Sandy. AGI was practically non-existent in 2012, in part due to the storm, vacant rental, and 3 trips to Long Island to deal with the property.

The date of Sandy was October 29, 2012. As taking huge casualty deductions will not benefit client in 2012, and the matter of insurance reimbursement is still being negotiated, it would behoove us to roll the casualty deduction into the basis of the property, currently only 1/10 of its value if renovations were completed.

Bear in mind that this is a business/rental casualty loss, and not a Sch A itemized deduction.

Any suggestions as to how to best bring this about? Most of the reading material concerns itself with the Sch A rules.

[Lion]

Isn't amending 2011 an option for a federal disaster during 2012? Did your client have more income during 2011?

[Snaggletooth]

Bumping Up

I'd like to try one more time to tap into the collective knowledge of this board. I believe this is perhaps more a question of strategy than of code and regs.

Simply put, client's 2012 return shows a huge rental loss, but it is mostly because of current 2012 expenses instead of capitalizable items. The expenses are several thousand dollars of inordinate travel in the weeks following Sandy -- none of them are building/repair/etc. which might be capitalized.

The fear is when the insurance reimbursements come and resulting sale of the property (which will ultimately happen). The original basis is only $30K and a probable sale of $350-$400K. We are trying to roll forward some $30K in losses again a probable casualty gain.

And we are looking for ways to do it...Lion, your input is appreciated as usual, and you are correct about 2011, but large gains in 2013 are the problem and not meager income in 2011.

Any expertise is appreciated...some of you may have Sandy victims as well.