Umbrella Policy Premiums

[Questionguy101]

Taxpayer has two properties. One is his home and the other one is a rental property. He has an umbrella policy which covers both properties. But the only reason that he got the umbrella policy is to protect himself against possible legal problems with the rental tenants.

Is the umbrella policy premiums deductible as a rental expense?

If yes, does he have to somehow divide the premiums between the home and the rental property and only deduct the portion allocated to the rental property?

If he has to divide the premiums, how should he do it?

[Brian EA]

Taxpayer has two properties. One is his home and the other one is a rental property. He has an umbrella policy which covers both properties. But the only reason that he got the umbrella policy is to protect himself against possible legal problems with the rental tenants.

Is the umbrella policy premiums deductible as a rental expense?

If yes, does he have to somehow divide the premiums between the home and the rental property and only deduct the portion allocated to the rental property?

If he has to divide the premiums, how should he do it?

The umbrella policy premiums are deductible as a rental expense.

The best way to divide the premiums between the personal and rental properties is to allocate based on their basis.

[erchess]

I'm afraid I agree with the last post

but I don't like it. I think that the vast majority of the risk to which the client is exposed comes from ownership of the rental property. He is liable for injuries and perhaps property damage sustained by the renting household as well as injuries sustained by visitors to the property and perhaps damage caused to other properties by the actions of the renters. At his home he is only liable for damage sustained by visitors or perhaps if his child's chemistry project blows up and sets the neighborhood on fire or his child''s stereo is loud enough to crack the foundation of the neighbor's house. I wonder if it would be possible to get the insurance company to itemize the costs of the umbrella policy the way the costs for an automobile insurance policy are itemized.

One of the things I realize as I get older is that sometimes there are injustices for which society has no easy fix.