Received a call from client who is getting his information ready. He owns a mountain cabin in
a resort area. Multi-use rental, however, he keeps personal use to 14 days or less.
The problem is that he belongs to homeowners association in resort and they advised him that
he had cracks in his retaining wall that would have to be fixed. Homeowners association said
that since the wall was entirely on his property that it would be his responsibility. He had to
hire engineers to determine the best way to make the repairs and by the time the repairs had
been completed he had spent $60,000 or so. During the time the repairs were being made he
was unable to rent the cabin so he had no rental income for about 10 months. In addition
when they were digging our behind wall they found that there was a pipe leak which could
have possible lead up to the wall failing.
Undecided on whether to do as repair expense, capitalize and depreciate, or consider the
possibility of casualty loss due to the pipe leak. His insurance would not reimburse for any
of the repairs on the wall due it not being in the insurance contract.
Since it was not available for rent during the repair stage would it have to be capitalized
and if so what would be the depreciation period for a retaining wall.
Any ideas would be appreciated prior to his coming to see me.
a resort area. Multi-use rental, however, he keeps personal use to 14 days or less.
The problem is that he belongs to homeowners association in resort and they advised him that
he had cracks in his retaining wall that would have to be fixed. Homeowners association said
that since the wall was entirely on his property that it would be his responsibility. He had to
hire engineers to determine the best way to make the repairs and by the time the repairs had
been completed he had spent $60,000 or so. During the time the repairs were being made he
was unable to rent the cabin so he had no rental income for about 10 months. In addition
when they were digging our behind wall they found that there was a pipe leak which could
have possible lead up to the wall failing.
Undecided on whether to do as repair expense, capitalize and depreciate, or consider the
possibility of casualty loss due to the pipe leak. His insurance would not reimburse for any
of the repairs on the wall due it not being in the insurance contract.
Since it was not available for rent during the repair stage would it have to be capitalized
and if so what would be the depreciation period for a retaining wall.
Any ideas would be appreciated prior to his coming to see me.
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