Involuntary conversion

[Taxadvisor VA]

Client owns a rental property that unfortunately in Aug 2012 burned to the ground. No one was injured which is the best news of all.
Now, in May 2013, the house was rebuilt with insurance proceeds so good to go there.
For taxes, the following cost figures were involved:
Total real property $265,605
Total land $175,000
Total personal prop $ 5,635

Total all property $446,240

How do you treat the real & personal property in terms of gain/loss? Since insurance basically covered everything, do you suspend depreciation on the date of the fire and start it back up when the building was fully restored and rented again?
Do you record any losses now on the 2012 tax return?
First for me so I'm at a loss what to do?
Thanks for anybodies input...
Taxadvisor VA

[Roland Slugg]

It appears from your numbers that what you referred to as "real property" was actually just the improvements ... i.e. the building. (Land and buildings are both "real property.")

The basis of the old building continues to be depreciated as before, and the excess paid for the replacement building, in excess of insurance proceeds, of there was an excess, is depreciated as a new asset starting with the date it's placed back in service. Thus, the replacement building will have a 2-part basis. There is an election that can be made to "start over" and depreciate the remaining basis of the old building over the life of the new one.

If there was a net loss, that would be treated as a business casualty loss. Report on F-4684.