Casualty Loss-FMV

[Bird Legs]

Have not had this before so need help.
Client, in Texas, owns a home on Bayview St., Stuart, FL. Total cost, including lot
$91,569. Rented to daughter & husband. Depreciation taken $13,425.=basis $78,144.
Estimate to restore the house, $75,126. Insurance paid $67,000.
Client says that before the hurricane hit the house, he could have sold it, house & lot,
for $125,000. Immediately after the hurricane hit, Speculators would have paid him
$150,000. It was mainly the 3 lots the house sits on thatthe speculators wanted.
The hurricane hit in Sept. 2004.
Based on the above figures I am coming up with a casualty loss of $1,000.
Guess what I am after is verification that this is correct.
Many thanks for your help on this.

[jainen]

Loss of value

Loss of value from the casualty was only $25,000, offset by insurance payment which produced a net gain of $42,000. $50,000 in repairs or capital improvements beyond the loss in value. I wonder if anyone will agree with me on this.

[Bird Legs]

Jainen-additional info

Client Quit claimed the deed to his daughter & husband Dec. 27, 2004.
Gift tax return due. \what would be the value of the gift?

Item 2: The $67,000. received from the insurance company was received in May, 2005
and given to daughter & husband to complete the work on house. Also gift tax return for $67,000. in 2005.

The husband was doing a lot of the work himself in 2004 and 2005.

[Bees Knees]

Gain on the insurance reimbursement only applies if the insurance reimbursement exceeds basis and the proceeds are not reinvested into fixing the property. So since insurance = $67,000 and basis = $78,144, there is no taxable gain, even if no repairs were made.

As to the casualty loss deduction, you seem to indicate FMV before was $125,000 but after it jumped up to $150,000. That’s not a casualty loss because the FMV didn’t go down, it went up. The casualty loss is the lesser of the reduction in FMV or basis. The reduction in FMV is negative $25,000, so no casualty loss.

[Mark Goldberg]

Value of gift

There were two gifts. The insurance money is clear. As for the FMV of the real estate. I would think that once they began fixing up the house, the value to the speculators might have been less than $150,000 as they now would have to pay extra to remove the structure.