Hail damage to home and farm buildings. Did not destroy anything, just damage. Form 4684 fill out? or do thru fixed assets and then goes to 4797? Client doesn't want to fix the buildings with damage, not bad enough. Could a qualified replacement be another new building.
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Also, buildings damages were depreciated out. more received than original cost. If TP pays taxes on the insurance reimbursement, does that become a new basis to start depreciation? -
Maybe my post wasn't clear. Depreciated out farm buildings were insured at replacement cost. TP did not repair the buildings, he used the money to build another farm building, but did not use all the money. All insurance money is going to be taxable. The farm buildings that were damaged are still usable. Can the insurance money he will be paying taxes on be added to the basis of these buildings and then be depreciated? If he had fixed the damaged buildings, I know, the amounts spent on repairs would not be taxable or depreciable.Comment
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Some answer
Since insurance funds were received for both, personal property and business property, and the business property was fully depreciated you deal with two different scenarios.
Generally, insurance funds not used for replacement property will reduce the basis. I assume the home wasn't depreciated, that portion should just reduce the basis of the home and is not income. I am not sure about the business property since no basis was left to be reduced.Comment
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