Disaster Loss on Rental Property

[Mom4Kids]

Hurrican Harvey Loss on Rental Property that was Sold in 2017. Taxpayer had rental property under contract for sale at $159,000; then Hurrican Harvey hit, and property damaged and he had to adjust sales price to $102,000. No Insurance Reimbursements. How do we input correctly in Lacerte? Can we carryback the loss to 2016? If so, how?

[George4Tacks · Accepted solution]

This sounds to me like a casualty loss, since TP still owned the property at the time of Harvey. This would be input as any other casualty loss, being sure to select the second item in the drop down for Disaster loss (Ctrl+T). That should generate a loss of 57,000 on page 2 of Form 4684. You would then do the sale of the rental for $102,000 generating either a gain or loss on Form 4797. If this all nets out to an NOL, you then can do a carryback or carryforward of that NOL either using 1040X (seems to be generally preferred) or 1045.

[TaxMonkey]

I would ignore the casualty aspect and just record the sale as is.  The loss is the same whether it is a casualty or simply a normal loss on the sale of a rental property.  If the loss generates an NOL then you can carry it back, either using Form 1045 or filing a 1040X.