Thanks Mike. I initially went the route you suggested, just adding the $11K to the asset. But I am exploring form 4684 because, when I tried it just to compare the outcomes, TT unexpectedly produced hugely different, more favorable results - I'll get to it further bellow. And also, because the pretense of the insurance might make IRS search for 4684 in my return.
But let us finish with the original question first, Form 4684, Sec. B, Pt 1, Line 20, adjusted basis of the partially destroyed property, depends on the method of calculation. That's why I was asking whether insurance estimate is one of those acceptable methods. Depending on the method I use, I come with results ranging from $23K, which would result in taxable income, to $31K, which would produce taxable loss. Using insurance estimate, if allowed, would give a slightly favorable result, a small taxable loss equal to $1K.
Also, if I go through the trouble of reporting on 4684, at what basis should I enter the new kitchen, $40K?
___________
As for why trying the Form 4684 produced more favorable results, I noticed that I ended up with much higher asset basis, which would result in lover cap. gains when sold. After investigating, I realized that, when filling 4684, TT did NOT reduce the basis for the amount of loss. At the same time, I enter the new kitchen onto the depreciation at its full cost of $40K. Did I get the correct results or should TT have reduced the original basis?
