Casualty loss then Rental property

[Possi]

My client had a casualty loss in 2016 for a flood in his home. Total out of pocket loss was $19,258.

Bottom line of the 4684 was a loss of $5615.

In 2017, he converted this home to a rental property.

Can the difference of 13,463 be capitalized and depreciated on the NOW-RENTAL property?

[jklcpa]

Yes, I believe you can. Since the casualty was before the conversion to rental, you would start with basis of the property and break out land. From there, concerning the casualty, this is what Pub 547 says about basis adjustment: 

Quote

Adjustments to Basis

If you have a casualty or theft loss, you must decrease your basis in the property by any insurance or other reimbursement you receive and by any deductible loss. The result is your adjusted basis in the property.

If you make either of the basis adjustments described above, amounts you spend on repairs that restore the property to its pre-casualty condition increase your adjusted basis.

I think you'll end up basically where you are intending with your question. 

The sum total of all of that should be the depreciable basis for the rental when it is put in service. 

[Possi]

7 hours ago, jklcpa said:

Yes, I believe you can. Since the casualty was before the conversion to rental, you would start with basis of the property and break out land. From there, concerning the casualty, this is what Pub 547 says about basis adjustment: 

I think you'll end up basically where you are intending with your question. 

The sum total of all of that should be the depreciable basis for the rental when it is put in service. 

Thanks, that's exactly where I was with it. I just could NOT find the rule. I really appreciate the post!