My rental property was burned down (fire) and my HOA rebuilt it then I sold.

[cborad2000]

My rental property was burned down in July 2023, I did not mention this in my 2023 return. I also did not have any homeowners insurance on the property. The property was deemed a total loss. My HOA's master insurance rebuilt it in July 2024  and I just sold it.  How would I incorporate all of these events for the coming tax year? 

[tagteam]

You need to stop depreciation on the property since it was no longer available for rental use after the fire (on the date the fire occurred rendering the property unavailable for rental purposes in 2023).

[tagteam]

Was the property available for rental purposes after it was rebuilt through the date of the sale?

If so, you could deduct typical rental expenses from that date to the date of the sale for the 2024 tax year.

Did the HOA insurance payout cover the entire rebuild? Did you have to pay an assessment?

You sales price would be the contract price less selling expenses while your basis would be dependent upon what you had to pay for the rebuild (or were assessed for it). 

[cborad2000]

No, right after the property was rebuilt; it was listed for sale and sold. 

The HOA paid for the entire reconstruction of the unit. I had no out-of-pocket costs as a homeowner.

How would I determine the cost basis ?

[cborad2000]

No, right after the property was rebuilt; it was listed for sale and sold. 

The HOA paid for the entire reconstruction of the unit. I had no out-of-pocket costs as a homeowner.

How would I determine the cost basis ?

[tagteam · Accepted solution]

If you had $0 costs (including assessments for reconstruction) and were made whole via the reconstruction, then your basis would be your adjusted basis prior to the event.

Your adjusted basis would be your cost (purchase price of the property) plus the costs of improvements made, less accumulated depreciation deductions.

[cborad2000]

Thank you 🙏