Leaderboard

IF (note the caps on IF) the purchase was made with the intent to demolish the home, the purchase price should be allocated to the land. The 20K of demolition costs would be added to the land in order to make it servicable for the new structure. New construction would be allocated to the home (provided that all the demo costs put the land in position to build on). Basis of the land is 270K and basis of the home is 400K. Depreciation for rental purposes would have to be determined at time it was placed into rental service. Lower of FMV or 400K. If sold, we would need to know the intent of the buyer at the time of purchase. IF it was purchased with the intent of building a personal residence, 20K non-deductible personal loss. IF it was purchased with the intent of building a home for immediate sale as an investment, 20K loss deductible as an investment loss. IF I knew more, this would be my humble opinion. Tom Hollister, CA