Schedule 1065 roof replacement

[elbanev]

Hi, 

We have a second home that we rent on AirBNB and we have it setup as a LLC (2 partners: husband and wife).  We bought the house in 2019 and we file a 1065 for LLC and we've taken several years of depreciation of the entire home (27.5 yr).

This past year, we had some ice damage on the roof and we submitted an insurance claim.  To make the numbers rough, we got a new roof which cost $100,000, which the insurance company gave us a check for $90,000. We were left to pay the $10,000 deductible.     

Tax questions:

1)  Since we are currently depreciating the home with the old roof, how do we retire just the old roof as it's gone with a salvage value of $0.  Do we just keep depreciating the entire structure as if nothing happened?  T

2) Do we make a new depreciation entry for the new roof of $100,000 and depreciate it for 27.5 years?  Or is it a $10,000 roof as that is the net of what it actually costed us?  How do we treat the $90,000 that came in from the insurance company as that is not revenue.  

[DaveF1006 · Accepted solution]

Yes, you would dispose of the old asset and begin a brand new depreciation schedule for the new roof. You would depreciate the amount you actually paid for it, which is $10,000. The remaining $90,000 is not income to you.

[elbanev]

Thanks Dave!  That make sense.

How to dispose of the old asset as the old asset is the entire purchase price of the house minus the land (in there, it included the old roof value).  The old roof was never broken out individually.

[DaveF1006]

My suggestion is just to leave it alone and depreciate the house like nothing happened.  I say this because if you really wanted to go by the book, you would need to determine what percentage of the basis is the roof then reduce the basis by that amount. That may be difficult to determine and may cause more heartaches to you in the end. 

Leave as is.

[elbanev]

Also, if the roof went on and was complete in August, do I take the full amount of Year 1 depreciation or half the amount as the roof went into service mid-year.

Thanks.

[ThomasM125]

When you enter the roof into TurboTax as Residential Rental Real Estate, you will be asked to enter the date you put it into service. It will be depreciated using straight line depreciation, so the depreciation for the first year will be calculated using the number of months it was in service. So in this case, you will get one half year depreciation if you put it into service mid-year.