Depreciation on insurance improvements

[silas]

Hi at the end of last year we had one side of a duplex that we had bought then renovated burnt down by the tenant. I am wondering how we claim depreciation. Can we claim depreciation on the new work that has been carried out by us through the insurance company or only on the renovated costs of our own. etc.

 

[geoffw]

Hmmm. Interesting situation- and I'd be interested in the views of somebody who is really qualified.

I'd be guessing to say that:
.Previous building costs could be written off in some way
.New building costs are repairs, they are not improvements- unless you took the opportunity to add something. If they are repairs, I'd be gueeesing the costs are depreciable
.But then YOU didn't provide the income to make the repairs- the insurance company did.

I'm only posting to perhaps provoke comment from somebody ho actuall knows the factss

 

[silas]

Thanks Geoff that is my dilema the fact that I didn't provide the funds and theoretically with insurance you are not meant to be reinstated as far as possible to the same position you were in before the incident not better or worse. I have been told both those positions that I can depreciate because they are new work and the work was done in my name even if paid by an insurance company. The other is that I can only claim on the renovations I did as the other was not paid by me and is just reinstateing me to the position I was in,

Silas

 

[skater]

My gut feeling on this is that you wouldn't be able to claim it because that would give you a benefit that did not exist before. I'd check with an accountant to get the correct info.

 

[depreciator]

There would be nothing specific in the Legislation that would cover this.

The work paid for by the insurance company would not be depreciable. That's the easy bit. (Of course, a subsequent owner will be able to depreciate the cost of this work.)

So what about the renovations that were destroyed?

1. You could continue to depreciate them. This would be the low risk course.

2. You could attempt to argue that because the work was 'disposed of', you should be able to claim the as yet undeducted depreciation in that work.

The problem with #2 is that the damage has been restored so the property is complete. Trying to argue #2 would be deemed fairly aggressive. It's one of those situations where you'd need a Private Ruling. I think you can apply for these on-line.

Scott