@Anonymous_
What sticks out to me is " Don’t increase your basis in the property by any qualified disaster mitigation payments "
I don't believe that an insurance payout is a qualified disaster mitigation payment. Am I wrong?
As I understand it, In the case of the roof, you would decrease your basis by the loss, then increase your basis by the cost of the replacement. In the end, there would be no loss per-se. But their could/would be an increase if the cost of the replacement is more than the cost of what was lost. The "cost of the loss" is what insurance paid out. Therefore, no loss. So the only addition to basis would be any out of pocket expense not covered/paid by the insurance.
Depending on the time of loss and time placed back in service, this could have a huge impact on depreciation. But with TTX, one would have to take the entire property out of service. Then when placing it back in service with the new roof, would have to use an adjusted cost basis. With TTX, this would require entering the property as a new asset with the adjusted cost basis that also takes into account the prior depreciation already taken with the 27.5 year depreciation starting over from year 1 using that adjusted cost basis. (Is there some other way to do this in TTX and still be able to e-file?) Additionally, that prior depreciation would have to be "remembered" outside of the program for recapture upon sale or other disposition of the property in the future.
My thinking on this line is because the original property asset includes the roof. As you know, if you just change the cost basis of an asset in the TTX program, it will totally skew not only the depreciation history, but the current year depreciation also. It seems to me to be one of those things that the program just flat out can't deal with "by the book".
