TP receives ins > cost basis. Gain? Or can he use on imprvs

[schirallicpa]

TP has Sch E rental house that he paid peanuts for ($16000) but has a decent value and insurance gave him $50000 after a fire.  Then he sold it as it stood for $10000.  But he has other houses that he rents.  Is he having to report all gain on the insurance proceeds or can he invest in his similar business assets?

[Lee B]

You didn't say whether this happened in 2017 or 2018?  It matters because of the TCJA.

[schirallicpa]

Sorry - I just assume everyone is still in 2017 like me.  Heck - I'm still in 2016 sometimes!  This is 2017

 

[schirallicpa]

But do gains on sales of properties count for TCJA.  Otherwise he has a loss on schedule E

[Max W]

23 hours ago, schirallicpa said:

But do gains on sales of properties count for TCJA.  Otherwise he has a loss on schedule E

You said this occurred in 2017, so TCJA has no effect

Here is a good article on deferring gain on the excess insurance.  There are a lot of variables, so it should be read carefully.

http://williamsparker.com/publications/practice-alerts-articles/real-estate/2005/01/03/taxation-of-the-recovery-of-insurance-proceeds