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mike48
New Member

We demolished a multi-unit apartment building in 2016. The "non-casualty disposition loss" is directly expensable. How do we enter this in TurboTax Home & Business?

Apartments were purchased in 2015 as income property with intent to renovate. Rent was collected from existing tenants, who were given the option to complete their leases or otherwise move out at their convenience, at which point the building was vacated for renovation work. Structural issues were discovered during renovation rendering the building unsalvageable.

Two accountants were consulted, who each advised that we could expense the remainder of the undepreciated value of the structure as "disposition loss". We are not selling the remaining land, retaining it as personal property.

There will be a multi-year carryover from the loss.

How do we enter this in TurboTax?

3 Replies
TaxGuyBill
Level 9

We demolished a multi-unit apartment building in 2016. The "non-casualty disposition loss" is directly expensable. How do we enter this in TurboTax Home & Business?

It seems like your original intent when you purchased the property was to keep the structures.  That usually means you can deduct the cost of the building.
https://www.law.cornell.edu/cfr/text/26/1.165-3

However, if it were to be determined your intent at the time of purchase were to demolish the building, unless you made the election to put the property in a General Asset Account (that is unusual, box 18 of your 2015 Form 4562 would be checked), demolition puts the basis/loss into the basis of the land.  You don't get anything until the land is sold.
https://www.law.cornell.edu/uscode/text/26/280B
mike48
New Member

We demolished a multi-unit apartment building in 2016. The "non-casualty disposition loss" is directly expensable. How do we enter this in TurboTax Home & Business?

Belated thanks, although like I said two tax accountants here disagree, each consulted independently. While the cost of the demolition work itself goes to the basis and is not deductible, the partial disposition loss of the value of the structure can be deducted as a miscellaneous expense similar to a casualty loss. But as it turned out, we elected not to do this given that we were taking a big loss already and it would have no effect on tax liability, and carryover would also not benefit our situation.
TaxGuyBill
Level 9

We demolished a multi-unit apartment building in 2016. The "non-casualty disposition loss" is directly expensable. How do we enter this in TurboTax Home & Business?

Great, I'm glad you figured it out.

Also, I think my original answer was wrong (I may have misread your post), so I will edit my original post.  Because your original INTENT when you purchased it was to keep the structure, it would likely be deductible.  See §1.165-3.  <a rel="nofollow" target="_blank" href="https://www.law.cornell.edu/cfr/text/26/1.165-3">https://www.law.cornell.edu/cfr/text/26/1.165-3</a>
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