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1 reply

E
ErnieS0
February 16, 2023

Claim a fire sale of rental property the way you would report any other sale of rental property. You’ll just have a larger loss.

 

Learn more at I sold my rental property. How do I report that?

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Carl11_2
Carl11_2
Employee
February 16, 2023

Assuming the insurance payout from the fire and the sale of the property occurred in the same tax year, you can treat it as a single sale, where you sold the structure to the insurance company for the payout amount, and sold the land to another for whatever they paid you for it. Just remember, you still have to recapture and pay tax on all depreciation taken up to the date it was no longer occupied and in service. (The date of the fire.)

It's also perfectly possible that you will have a gain on the sale. it just depends on the numbers.

 

A
AbrahamT
February 22, 2023

See also page 8 & 13 in Publication 547 HERE regarding casualty reimbursements from insurance companies to determine how to figure the gain and the basis in the property. Also, check out Pg. 5 and 6 in Pub 551 HERE as to what criteria increases or decreases basis in real property.

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