capital gain?

[Possi]

My new clients, older retired couple, bought their home in 1979. In 2003 they lost it to hurricane Isabel. The house was leveled and not rebuilt. They have been renting ever since. Now they will be selling the property where the house once stood.

It might be a problem getting basis on this land for the sale of the property. Any suggestions?

[Lion EA]

They'll have to drag out their purchase paperwork anyway to get closing costs that can be deductible, so see if the land is broken out there.  If not, the tax assessor's office would have the breakout when they purchased the property, but maybe using a formulaic assessment instance of actual purchase price; use that ratio with their purchase price.  Add the costs of leveling to land basis, right?

[kcjenkins]

Was there any insurance  recovery?

[Richcpaman]

Actually, this is really simple. 

Add: Purchase Costs

Add: Closing costs at Purchase or refinancing

Add: Improvements

Add: Closing costs at sale

Less: Insurance reimbursement at time of hurricane.

equals: Basis at time of sale

Then they pay tax on the gain,  Do not deduct the loss (unless the purpose of the property changed to investment after leveling)

Rich

[Abby Normal]

But the gain on the house would have happened in 2003. Would be really nice to have that return to see how much basis was claimed against the insurance proceeds.

[DANRVAN]

1 hour ago, Abby Normal said:

But the gain on the house would have happened in 2003. .

and gain from involuntary conversion  excluded under section 121