mactoolsix: ?s re your experience of Big Sur, CA, disaster

[rmcgrobi]

Hi, Thank you for your input for my last post about the farmer who lost the farm.

Client advises me that all the buildings on the land are unpermitted. Assessor's office lists the farm to be just land. We have been depreciating the buildings. Farmer had NO insurance. ?1) Should we report these partially depreciated buildings on 2016 tax return?

?2) I assume the equipment purchased and then lost to the fire/flood can be listed?

?3) Some olive trees are still standing. Farmer plans to replant more olive trees and turn farm into only olive farm. Pg. 31 of Pub 225 states that "any costs of replanting certain plants (with a preproductive period of more than 2 years; olive trees) lost or damaged due to casualty" are not to be capitalized. The trees had been capitalized by another tax preparer many years ago. I assume we don't capitalize the newly planted trees?

Thanks for any answers and more information you can provide. I really appreciate your knowledge.

[taxea]

Hi, Thank you for your input for my last post about the farmer who lost the farm.

Client advises me that all the buildings on the land are unpermitted. Assessor's office lists the farm to be just land. We have been depreciating the buildings. Farmer had NO insurance. ?1) Should we report these partially depreciated buildings on 2016 tax return?

?2) I assume the equipment purchased and then lost to the fire/flood can be listed?

?3) Some olive trees are still standing. Farmer plans to replant more olive trees and turn farm into only olive farm. Pg. 31 of Pub 225 states that "any costs of replanting certain plants (with a preproductive period of more than 2 years; olive trees) lost or damaged due to casualty" are not to be capitalized. The trees had been capitalized by another tax preparer many years ago. I assume we don't capitalize the newly planted trees?

Thanks for any answers and more information you can provide. I really appreciate your knowledge.

1. he won't be able to sell when the time comes unless he pays for the building permits. I would still depreciate the buildings. One has nothing to do with the other for tax deduction purposes until/unless he sells the farm

2. equipment is either reported as a loss or if replaced it would be depreciated

3. the trees are replacements for trees that were loss. I would deduct them as loss and then deduct new plants as addressed in your quote

[mactoolsix]

MC,
The only purpose for getting an assessors valuation was to establish a decrease in value. As Texea says the fact they are not "permitted" buildings has nothing to do with depreciation. However, I disagree that not being built with a permit would disallow a sale - it may deter it a bit, but it is not unusual for a non-permitted building to be sold.

So, to your questions: You have a loss of the un-depreciated value of the buildings. Good luck finding anyone that will give a loss of value on the land.

You can claim the loss of equipment.

My interpretation of your quote about the trees: It sounds like the trees were fully depreciated. I think your quote from pub225 pertains to plants not fully depreciated. Thus the destroyed trees have no basis. I would simply begin depreciation on the newly planted trees.

Mike