Tax question regarding deduction and depreciation in one of my rentals

[James Park]

I have a townhome in Chicago that i lived in from Jan 1st - June 30th, 2011. I had this property rented from July 1st - December 31st, 2011. I had a flood in August 2011 which cost me $15,000 out-of-pocket to restore the basement as I did not have flood insurance at the time.

My new CPA in Atlanta tells me that since lived in this home for half the year, I cannot depreciate the Chicago rental property in 2011. He also told me that i cannot deduct any of my $15,000 repair costs in 2011, but will carry over to 2012. My AGI, in 2011 will allow me to deduct up to the full $25,000 rental passive loss in 2011. Is my CPA correct that I cannot depreciate or deduct any of the $15,000 basement restoration cost for my 1040 taxes in 2011?

[Steven Hamilton II]

James,

Time for a new CPA. He is wrong. You need to find someone who knows real estate fairly well.

You will have depreciation for 50% of the year. You will also be able to expense some of the 15k. You will be forced to depreciate any of that relating to structural components such as furnace, stairs, etc.

If you have any questions regarding your return and want the correct answers, just ask here. I will be happy to provide you with the correct answer. I'll be following this topic.

-Steven the Tax Guy