Confused about Casualty Loss and Depreciable Asset

Forum|Forum|5 years ago
March 3, 2021
3 replies
16 views

How do I handle Casualty Losses on items that are on my Depreciation Report? I've entered the Casualty loss of the A/C Unit in the Casualty Loss section of TurboTax, but how do I get this removed off of the Depreciation Report? If I enter this in both places, won't it double-book the loss on Form 4797?

WendyN2

Level 9

Report casualty and theft losses on IRS Form 4684 Casualties and Thefts PDF. ("Business" - Business Income" - "Business Assets" "Tell us more about this asset" - and select "This item was sold, retired, stolen, destroyed...." Enter the date, then "Continue" and select "Yes" at the next screen as it was destroyed due to casualty (one of the stipulations of selecting "Yes").

Use Section A for personal-use property and Section B for business or income-producing property. For losses involving business-use property, refer to IRS Publication 584 - Business Casualty Losses

Stupidasur3Author

Level 4

This doesn't answer my question. How do I get the item to stop depreciating on my depreciation report?

ThomasM125

Level 15

You have to indicate that the asset was removed from service in the business section of your return to stop the depreciation on it.

A casualty loss is intended to allow you to deduct a loss on a personal asset. The destruction of a business asset is allowed whether or not it came about from a casualty. So, you should remove the casualty loss that you entered and find the asset entry in the business section of your return and indicate that it was removed from service.

You will be asked to enter the sales amount (insurance proceeds) associated with the disposition, and the difference between that and the adjusted basis of the asset (cost less depreciation) will give you a deductible loss or taxable gain.

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physicsdoc2

Level 2

how do I enter a partial asset disposition from a casualty loss (roof lost in hailstorm) on a rental home I own? asset entry form does not seem to allow partial dispositions only complete disposition. I need to reduce basis of rental but only by adjusted value of lost roof

physicsdoc2

Level 2

To clarify, the hailstorm destroyed roof was the original roof from the 2005 rental home purchase, so I need to remove the portion of the adjusted basis for the destroyed roof only and the basis for the rest of the home should continue to be depreciated over the 13 years left from the original 27.5 year depreciation schedule. I have already calculated the basis of the destroyed roof using a partial asset disposition calculator from the KBKG website. My problem is how to do the entries on TT for a partial asset disposition to get the future depreciation correct.

AmyC

Level 15

@physicsdoc2 You will need to add the house again using the new basis for current and future depreciation. Keep the dates the same. You will need to keep track of the prior depreciation in your financial notebook. Delete the old house asset after getting the new one in place.

Add the roof as a new asset.

See Publication 527, Residential Rental Property (Including Rental of Vacation Homes), in particular, restoration.

I want to urge you to create a financial notebook that is kept separate from your tax return. Keep it safe and each year, add your year-end statements from all your financial accounts plus a copy of your W2’s, your schedule E carryover information, and proof of your basis in your various investments. You must keep tax records related to a rental house from the time you purchase until you sell plus 3 years. It is very easy to lose track of disallowed losses, prior depreciation, etc.

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Cardium

Level 2

How do I remove my building depreciation schedule for a destroyed building?

PatriciaV

Level 15

Please clarify how the building was reported - Schedule C or Schedule E? Also, was the building destroyed in the current tax year or are you trying to remove a building that was reported destroyed in a prior tax year?

Also note that creating a new question in the Community will often result in a faster and more focused answer than posting to a thread that's been closed for four years.

@Cardium

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