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wafco33
Returning Member

Add depreciated value of roof to building cost basis?

If you "sell" each of the non land/building assets(such as fence, roof) for a gain as was the entire property sale (more than cost) I don't see how you benefit ie. recovering the cost that you paid for the fence roof etc
 
Ex= 27.5 k for new roof depreciated over 27.5 yrs, got 5 yrs into so 5k was depreciated and then sell the rental property - is the remaining 22.5 k is then added to the "cost basis of the building" or a "selling expense" or what so that I benefit from the cost of installing a new roof.   

 

Other posts say use the roof current FMV, but since the sale of entire property is 3x the purchase cost, a FMV of roof 3x what I paid for it seems unreasonable

 

So for the remaining 22.5k roof asset i will

1>sell roof for 22.5k for a 0 gain 

2>no expense of selling, keep selling expenses all on building

3>add 22.5k to cost basis. Since Purchase price was 200k for  building and 300k for Land, the roof added to the original basis(ignoring depreciation to make this simple) the new cost basis of building will be 220k 

4> assume Form 4797 gets the recaptured depreciation of 5k

 

Is this an acceptable approach, or are there errors?

5 Replies
Critter-3
Level 15

Add depreciated value of roof to building cost basis?

duplicate post

wafco33
Returning Member

Add depreciated value of roof to building cost basis?

Not a duplicate, this asks specific questions

Critter-3
Level 15

Add depreciated value of roof to building cost basis?

You are making this much harder than it is ... look at my answer in your other posts. 

Critter-3
Level 15

Add depreciated value of roof to building cost basis?

ALL the assets listed for depreciation need to be sold so you need to allocate the sale price & costs of sale over all of them.  You cannot just give it a $1 sale price as it will throw off the total calculations.

 

 A simple example using 100,000 of assets  and a sale price of 200,000 : 

 

assets              original basis             % of total basis      sales price     cost of sale

house             70,000                          70%                         140,000          14,000

land                20,000                           20%                            40,000           4000

roof                10,000                           10%                             20,000           2000

 totals            100,000                         100%                         200,000         20,000

Carl
Level 15

Add depreciated value of roof to building cost basis?

Recaptured depreciation is added to the gain (in a sense). It is not added back to the cost basis.

Remember, depreciation *reduces* your cost basis, thus increasing your gain if sold at a gain, or reducing your loss if sold at a loss.

 

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