2nd home with rent not for profit

[nwtaxlady]

I have a new client that has a 2nd home that has been renting out to a relative not for profit. The prior tax practitioner would put the rent income on line 21 or whatever line it is these days. And put the property taxes and mortgage interest on SCH A. OK, I am fine with that. Now in 2019 they had pipe break and had major flood damage and insurance paid for repairs plus loss rents. And at this point they decided to make additional improvements to the house so that they could sell it. The house just sold in April 2020. So my question is, Do I continue to report rents including the insurance money for loss rents on line 21 (or whatever line it is now) and property taxes and mortgage interest on SCH A just like it has been reported in prior years and then take ALL the expenses and add to basis for the sale in 2020?

They had received loss of use payment (rents) of $6758 on top of their rent collected up to flood of $4350 So that total would be $11,108 for rents. On top of that they received about $19,685 from the insurance company for repairs etc. that then went straight to the contracting company that did the work. And then on top of all that they had updated kitchen and new roof and paint and utilities etc that all came to about $40,000.
So if I continue on with how this was reported in prior years, I would put the $11,108 on line 21 other income and do nothing with the $19,685 reimb from insurance company. Then all the other expenses hold over to add to basis for the sale in April 2020? Do you agree with this or should it be on Sch E?
I appreciate any input here. Thanks.

[TaxGuyBill]

If it actually is a non-for-profit, yes, I agree with all of what you said.

Whether or not it actually is a not-for-profit depends on the facts-and-circumstances. For example, how much lower is the rent that they paid versus the Fair Rental Value? Generally it can be less because a relative is less likely to cause problems and be more helpful with things. But if it is drastically less, then it probably is a not-for-profit rental. Another thing to consider when trying to determine if it for-profit or not is to look at how large of a loss it is each year if it was reported on Schedule E with all expenses. Then how much of a loss would it be WITHOUT depreciation of the structure?