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Amend taxes Publication 536 - Introductory Material Table of Contents Reminders IntroductionOrdering forms and publications. Amend taxes Tax questions. Amend taxes Useful Items - You may want to see: Reminders Future developments. Amend taxes  For the latest developments related to Publication 536, such as legislation enacted after we release it, go to www. Amend taxes irs. Amend taxes gov/pub536. Amend taxes Photographs of missing children. Amend taxes  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Amend taxes Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Amend taxes You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Amend taxes Introduction If your deductions for the year are more than your income for the year, you may have a net operating loss (NOL). Amend taxes An NOL year is the year in which an NOL occurs. Amend taxes You can use an NOL by deducting it from your income in another year or years. Amend taxes What this publication covers. Amend taxes   This publication discusses NOLs for individuals, estates, and trusts. Amend taxes It covers: How to figure an NOL, When to use an NOL, How to claim an NOL deduction, and How to figure an NOL carryover. Amend taxes To have an NOL, your loss must generally be caused by deductions from your: Trade or business, Work as an employee, Casualty and theft losses, Moving expenses, or Rental property. Amend taxes A loss from operating a business is the most common reason for an NOL. Amend taxes Partnerships and S corporations generally cannot use an NOL. Amend taxes However, partners or shareholders can use their separate shares of the partnership's or S corporation's business income and business deductions to figure their individual NOLs. Amend taxes Keeping records. Amend taxes   You should keep records for any tax year that generates an NOL for 3 years after you have used the carryback/carryforward or 3 years after the carryforward expires. Amend taxes    You should attach all required documents to the Form 1045 or Form 1040X. Amend taxes For details, see the instructions for Form 1045 or Form 1040X. Amend taxes What is not covered in this publication?   The following topics are not covered in this publication. Amend taxes Bankruptcies. Amend taxes See Publication 908, Bankruptcy Tax Guide. Amend taxes NOLs of corporations. Amend taxes See Publication 542, Corporations. Amend taxes Section references. Amend taxes   Section references are to the Internal Revenue Code unless otherwise noted. Amend taxes Comments and suggestions. Amend taxes   We welcome your comments about this publication and your suggestions for future editions. Amend taxes   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Amend taxes NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Amend taxes Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Amend taxes   You can send your comments from www. Amend taxes irs. Amend taxes gov/formspubs/. Amend taxes Click on “More Information. Amend taxes ” and then on “Comment on Tax Forms and Publications. Amend taxes ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Amend taxes Ordering forms and publications. Amend taxes   Visit www. Amend taxes irs. Amend taxes gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Amend taxes Internal Revenue Service 1201 N. Amend taxes Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Amend taxes   If you have a tax question, check the information available on IRS. Amend taxes gov or call 1-800-829-1040. Amend taxes We cannot answer tax questions sent to either of the above addresses. Amend taxes Useful Items - You may want to see: Form (and Instructions) 1040X Amended U. Amend taxes S. Amend taxes Individual Income Tax Return 1045 Application for Tentative Refund   See How To Get Tax Help near the end of this publication for information about getting these forms. Amend taxes Prev  Up  Next   Home   More Online Publications
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Amend taxes 25. Amend taxes   Nonbusiness Casualty and Theft Losses Table of Contents What's New Introduction Useful Items - You may want to see: CasualtyFamily pet. Amend taxes Progressive deterioration. Amend taxes Damage from corrosive drywall. Amend taxes Theft Loss on Deposits Proof of Loss Figuring a LossDecrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Single Casualty on Multiple Properties Deduction Limits$100 Rule 10% Rule When To Report Gains and LossesDisaster Area Loss How To Report Gains and Losses What's New New Section C of Form 4684 for Ponzi-type investment schemes. Amend taxes  Section C of Form 4684 is new for 2013. Amend taxes You must complete Section C if you are claiming a theft loss deduction due to a Ponzi-type investment scheme and are using Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58. Amend taxes Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Amend taxes You do not need to complete Appendix A. Amend taxes For details, see Losses from Ponzi-type investment schemes , in this chapter. Amend taxes Introduction This chapter explains the tax treatment of personal (not business or investment related) casualty losses, theft losses, and losses on deposits. Amend taxes The chapter also explains the following  topics. Amend taxes How to figure the amount of your loss. Amend taxes How to treat insurance and other reimbursements you receive. Amend taxes The deduction limits. Amend taxes When and how to report a casualty or theft. Amend taxes Forms to file. Amend taxes    When you have a casualty or theft, you have to file Form 4684. Amend taxes You will also have to file one or more of the following forms. Amend taxes Schedule A (Form 1040), Itemized Deductions Schedule D (Form 1040), Capital Gains and Losses Condemnations. Amend taxes   For information on condemnations of property, see Involuntary Conversions in chapter 1 of Publication 544, Sales and Other Disposition of Assets. Amend taxes Workbook for casualties and thefts. Amend taxes    Publication 584 is available to help you make a list of your stolen or damaged personal-use property and figure your loss. Amend taxes It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. Amend taxes Business or investment-related losses. Amend taxes   For information on a casualty or theft loss of business or income-producing property, see Publication 547, Casualties, Disasters, and Thefts. Amend taxes Useful Items - You may want to see: Publication 544 Sales and Other Dispositions  of Assets 547 Casualties, Disasters, and   Thefts 584 Casualty, Disaster, and Theft   Loss Workbook (Personal-Use  Property) Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule D (Form 1040) Capital Gains and Losses 4684 Casualties and Thefts Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Amend taxes A sudden event is one that is swift, not gradual or progressive. Amend taxes An unexpected event is one that is ordinarily unanticipated and unintended. Amend taxes An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. Amend taxes Deductible losses. Amend taxes   Deductible casualty losses can result from a number of different causes, including the following. Amend taxes Car accidents (but see Nondeductible losses , next, for exceptions). Amend taxes Earthquakes. Amend taxes Fires (but see Nondeductible losses , next, for exceptions). Amend taxes Floods. Amend taxes Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses in Publication 547. Amend taxes Mine cave-ins. Amend taxes Shipwrecks. Amend taxes Sonic booms. Amend taxes Storms, including hurricanes and tornadoes. Amend taxes Terrorist attacks. Amend taxes Vandalism. Amend taxes Volcanic eruptions. Amend taxes Nondeductible losses. Amend taxes   A casualty loss is not deductible if the damage or destruction is caused by the following. Amend taxes Accidentally breaking articles such as glassware or china under normal conditions. Amend taxes A family pet (explained below). Amend taxes A fire if you willfully set it or pay someone else to set it. Amend taxes A car accident if your willful negligence or willful act caused it. Amend taxes The same is true if the willful act or willful negligence of someone acting for you caused the accident. Amend taxes Progressive deterioration (explained later). Amend taxes Family pet. Amend taxes   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed earlier under Casualty are met. Amend taxes Example. Amend taxes Your antique oriental rug was damaged by your new puppy before it was housebroken. Amend taxes Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. Amend taxes Progressive deterioration. Amend taxes    Loss of property due to progressive deterioration is not deductible as a casualty loss. Amend taxes This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Amend taxes The following are examples of damage due to progressive deterioration. Amend taxes The steady weakening of a building due to normal wind and weather conditions. Amend taxes The deterioration and damage to a water heater that bursts. Amend taxes However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. Amend taxes Most losses of property caused by droughts. Amend taxes To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. Amend taxes Termite or moth damage. Amend taxes The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. Amend taxes However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. Amend taxes Damage from corrosive drywall. Amend taxes   Under a special procedure, you may be able to claim a casualty loss deduction for amounts you paid to repair damage to your home and household appliances that resulted from corrosive drywall. Amend taxes For details, see Publication 547. Amend taxes Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. Amend taxes The taking of property must be illegal under the laws of the state where it occurred and it must have been done with criminal intent. Amend taxes You do not need to show a conviction for theft. Amend taxes Theft includes the taking of money or property by the following means. Amend taxes Blackmail. Amend taxes Burglary. Amend taxes Embezzlement. Amend taxes Extortion. Amend taxes Kidnapping for ransom. Amend taxes Larceny. Amend taxes Robbery. Amend taxes The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Amend taxes Decline in market value of stock. Amend taxes   You cannot deduct as a theft loss the decline in market value of stock acquired on the open market for investment if the decline is caused by disclosure of accounting fraud or other illegal misconduct by the officers or directors of the corporation that issued the stock. Amend taxes However, you can deduct as a capital loss the loss you sustain when you sell or exchange the stock or the stock becomes completely worthless. Amend taxes You report a capital loss on Schedule D (Form 1040). Amend taxes For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Amend taxes Mislaid or lost property. Amend taxes   The simple disappearance of money or property is not a theft. Amend taxes However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Amend taxes Sudden, unexpected, and unusual events are defined earlier. Amend taxes Example. Amend taxes A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Amend taxes The diamond falls from the ring and is never found. Amend taxes The loss of the diamond is a casualty. Amend taxes Losses from Ponzi-type investment schemes. Amend taxes   If you had a loss from a Ponzi-type investment scheme, see: Revenue Ruling 2009-9, 2009-14 I. Amend taxes R. Amend taxes B. Amend taxes 735 (available at www. Amend taxes irs. Amend taxes gov/irb/2009-14_IRB/ar07. Amend taxes html). Amend taxes Revenue Procedure 2009-20, 2009-14 I. Amend taxes R. Amend taxes B. Amend taxes 749 (available at www. Amend taxes irs. Amend taxes gov/irb/2009-14_IRB/ar11. Amend taxes html). Amend taxes Revenue Procedure 2011-58, 2011-50 I. Amend taxes R. Amend taxes B. Amend taxes 849 (available at www. Amend taxes irs. Amend taxes gov/irb/2011-50_IRB/ar11. Amend taxes html). Amend taxes If you qualify to use Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, and you choose to follow the procedures in the guidance, first fill out Section C of Form 4684 to determine the amount to enter on Section B, line 28. Amend taxes Skip lines 19 to 27. Amend taxes Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Amend taxes You do not need to complete Appendix A. Amend taxes For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. Amend taxes   If you choose not to use the procedures in Revenue Procedure 2009-20, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. Amend taxes Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Amend taxes If you incurred this type of loss, you can choose one of the following ways to deduct the loss. Amend taxes As a casualty loss. Amend taxes As an ordinary loss. Amend taxes As a nonbusiness bad debt. Amend taxes Casualty loss or ordinary loss. Amend taxes   You can choose to deduct a loss on deposits as a casualty loss or as an ordinary loss for any year in which you can reasonably estimate how much of your deposits you have lost in an insolvent or bankrupt financial institution. Amend taxes The choice is generally made on the return you file for that year and applies to all your losses on deposits for the year in that particular financial institution. Amend taxes If you treat the loss as a casualty or ordinary loss, you cannot treat the same amount of the loss as a nonbusiness bad debt when it actually becomes worthless. Amend taxes However, you can take a nonbusiness bad debt deduction for any amount of loss that is more than the estimated amount you deducted as a casualty or ordinary loss. Amend taxes Once you make this choice, you cannot change it without permission from the Internal Revenue Service. Amend taxes   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Amend taxes The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. Amend taxes Your loss is subject to the 2%-of-adjusted-gross-income limit. Amend taxes You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. Amend taxes Nonbusiness bad debt. Amend taxes   If you do not choose to deduct the loss as a casualty loss or as an ordinary loss, you must wait until the year the actual loss is determined and deduct the loss as a nonbusiness bad debt in that year. Amend taxes How to report. Amend taxes   The kind of deduction you choose for your loss on deposits determines how you report your loss. Amend taxes If you choose: Casualty loss — report it on Form 4684 first and then on Schedule A (Form 1040). Amend taxes Ordinary loss — report it on Schedule A (Form 1040) as a miscellaneous itemized deduction. Amend taxes Nonbusiness bad debt — report it on Form 8949 first and then on Schedule D (Form 1040). Amend taxes More information. Amend taxes   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684 or Deposit in Insolvent or Bankrupt Financial Institution in Publication 550. Amend taxes Proof of Loss To deduct a casualty or theft loss, you must be able to prove that you had a casualty or theft. Amend taxes You also must be able to support the amount you take as a deduction. Amend taxes Casualty loss proof. Amend taxes   For a casualty loss, your records should show all the following. Amend taxes The type of casualty (car accident, fire, storm, etc. Amend taxes ) and when it occurred. Amend taxes That the loss was a direct result of the casualty. Amend taxes That you were the owner of the property or, if you leased the property from someone else, that you were contractually liable to the owner for the damage. Amend taxes Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Amend taxes Theft loss proof. Amend taxes   For a theft loss, your records should show all the following. Amend taxes When you discovered that your property was missing. Amend taxes That your property was stolen. Amend taxes That you were the owner of the property. Amend taxes Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Amend taxes It is important that you have records that will prove your deduction. Amend taxes If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. Amend taxes Figuring a Loss Figure the amount of your loss using the following steps. Amend taxes Determine your adjusted basis in the property before the casualty or theft. Amend taxes Determine the decrease in fair market value of the property as a result of the casualty or theft. Amend taxes From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. Amend taxes For personal-use property and property used in performing services as an employee, apply the deduction limits, discussed later, to determine the amount of your deductible loss. Amend taxes Gain from reimbursement. Amend taxes   If your reimbursement is more than your adjusted basis in the property, you have a gain. Amend taxes This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. Amend taxes If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. Amend taxes See Publication 547 for more information on how to treat a gain from a reimbursement for a casualty or theft. Amend taxes Leased property. Amend taxes   If you are liable for casualty damage to property you lease, your loss is the amount you must pay to repair the property minus any insurance or other reimbursement you receive or expect to receive. Amend taxes Decrease in Fair Market Value Fair market value (FMV) is the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts. Amend taxes The decrease in FMV used to figure the amount of a casualty or theft loss is the difference between the property's fair market value immediately before and immediately after the casualty or theft. Amend taxes FMV of stolen property. Amend taxes   The FMV of property immediately after a theft is considered to be zero, since you no longer have the property. Amend taxes Example. Amend taxes Several years ago, you purchased silver dollars at face value for $150. Amend taxes This is your adjusted basis in the property. Amend taxes Your silver dollars were stolen this year. Amend taxes The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. Amend taxes Your theft loss is $150. Amend taxes Recovered stolen property. Amend taxes   Recovered stolen property is your property that was stolen and later returned to you. Amend taxes If you recovered property after you had already taken a theft loss deduction, you must refigure your loss using the smaller of the property's adjusted basis (explained later) or the decrease in FMV from the time just before it was stolen until the time it was recovered. Amend taxes Use this amount to refigure your total loss for the year in which the loss was deducted. Amend taxes   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. Amend taxes But report the difference only up to the amount of the loss that reduced your tax. Amend taxes For more information on the amount to report, see Recoveries in chapter 12. Amend taxes Figuring Decrease in FMV— Items To Consider To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. Amend taxes However, other measures can also be used to establish certain decreases. Amend taxes Appraisal. Amend taxes   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterward should be made by a competent appraiser. Amend taxes The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Amend taxes This information is needed to limit any deduction to the actual loss resulting from damage to the property. Amend taxes   Several factors are important in evaluating the accuracy of an appraisal, including the following. Amend taxes The appraiser's familiarity with your property before and after the casualty or theft. Amend taxes The appraiser's knowledge of sales of comparable property in the area. Amend taxes The appraiser's knowledge of conditions in the area of the casualty. Amend taxes The appraiser's method of appraisal. Amend taxes    You may be able to use an appraisal that you used to get a federal loan (or a federal loan guarantee) as the result of a federally declared disaster to establish the amount of your disaster loss. Amend taxes For more information on disasters, see Disaster Area Losses, in Pub. Amend taxes 547. Amend taxes Cost of cleaning up or making repairs. Amend taxes   The cost of repairing damaged property is not part of a casualty loss. Amend taxes Neither is the cost of cleaning up after a casualty. Amend taxes But you can use the cost of cleaning up or making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. Amend taxes The repairs are actually made. Amend taxes The repairs are necessary to bring the property back to its condition before the casualty. Amend taxes The amount spent for repairs is not excessive. Amend taxes The repairs take care of the damage only. Amend taxes The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Amend taxes Landscaping. Amend taxes   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. Amend taxes You may be able to measure your loss by what you spend on the following. Amend taxes Removing destroyed or damaged trees and shrubs minus any salvage you receive. Amend taxes Pruning and other measures taken to preserve damaged trees and shrubs. Amend taxes Replanting necessary to restore the property to its approximate value before the casualty. Amend taxes Car value. Amend taxes    Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. Amend taxes You can use the book's retail values and modify them by such factors as mileage and the condition of your car to figure its value. Amend taxes The prices are not official, but they may be useful in determining value and suggesting relative prices for comparison with current sales and offerings in your area. Amend taxes If your car is not listed in the books, determine its value from other sources. Amend taxes A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. Amend taxes Figuring Decrease in FMV— Items Not To Consider You generally should not consider the following items when attempting to establish the decrease in FMV of your property. Amend taxes Cost of protection. Amend taxes   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. Amend taxes The amount you spend on insurance or to board up your house against a storm is not part of your loss. Amend taxes   If you make permanent improvements to your property to protect it against a casualty or theft, add the cost of these improvements to your basis in the property. Amend taxes An example would be the cost of a dike to prevent flooding. Amend taxes Exception. Amend taxes   You cannot increase your basis in the property by, or deduct as a business expense, any expenditures you made with respect to qualified disaster mitigation payments. Amend taxes See Disaster Area Losses in Publication 547. Amend taxes Incidental expenses. Amend taxes   Any incidental expenses you have due to a casualty or theft, such as expenses for the treatment of personal injuries, for temporary housing, or for a rental car, are not part of your casualty or theft loss. Amend taxes Replacement cost. Amend taxes   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. Amend taxes Sentimental value. Amend taxes   Do not consider sentimental value when determining your loss. Amend taxes If a family portrait, heirloom, or keepsake is damaged, destroyed, or stolen, you must base your loss on its FMV, as limited by your adjusted basis in the property. Amend taxes Decline in market value of property in or near casualty area. Amend taxes   A decrease in the value of your property because it is in or near an area that suffered a casualty, or that might again suffer a casualty, is not to be taken into consideration. Amend taxes You have a loss only for actual casualty damage to your property. Amend taxes However, if your home is in a federally declared disaster area, see Disaster Area Losses in Publication 547. Amend taxes Costs of photographs and appraisals. Amend taxes    Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. Amend taxes Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. Amend taxes    Appraisals are used to figure the decrease in FMV because of a casualty or theft. Amend taxes See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. Amend taxes   The costs of photographs and appraisals used as evidence of the value and condition of property damaged as a result of a casualty are not a part of the loss. Amend taxes You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). Amend taxes For information about miscellaneous deductions, see chapter 28. Amend taxes Adjusted Basis Adjusted basis is your basis in the property (usually cost) increased or decreased by various events, such as improvements and casualty losses. Amend taxes For more information, see chapter 13. Amend taxes Insurance and Other Reimbursements If you receive an insurance payment or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Amend taxes You do not have a casualty or theft loss to the extent you are reimbursed. Amend taxes If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Amend taxes You must reduce your loss even if you do not receive payment until a later tax year. Amend taxes See Reimbursement Received After Deducting Loss , later. Amend taxes Failure to file a claim for reimbursement. Amend taxes   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. Amend taxes Otherwise, you cannot deduct this loss as a casualty or theft loss. Amend taxes However, this rule does not apply to the portion of the loss not covered by insurance (for example, a deductible). Amend taxes Example. Amend taxes You have a car insurance policy with a $1,000 deductible. Amend taxes Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the deduction limits discussed later). Amend taxes This is true even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. Amend taxes Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. Amend taxes Other types of reimbursements are discussed next. Amend taxes Also see the Instructions for Form 4684. Amend taxes Employer's emergency disaster fund. Amend taxes   If you receive money from your employer's emergency disaster fund and you must use that money to rehabilitate or replace property on which you are claiming a casualty loss deduction, you must take that money into consideration in computing the casualty loss deduction. Amend taxes Take into consideration only the amount you used to replace your destroyed or damaged property. Amend taxes Example. Amend taxes Your home was extensively damaged by a tornado. Amend taxes Your loss after reimbursement from your insurance company was $10,000. Amend taxes Your employer set up a disaster relief fund for its employees. Amend taxes Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. Amend taxes You received $4,000 from the fund and spent the entire amount on repairs to your home. Amend taxes In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. Amend taxes Your casualty loss before applying the deduction limits discussed later is $6,000. Amend taxes Cash gifts. Amend taxes   If you receive excludable cash gifts as a disaster victim and there are no limits on how you can use the money, you do not reduce your casualty loss by these excludable cash gifts. Amend taxes This applies even if you use the money to pay for repairs to property damaged in the disaster. Amend taxes Example. Amend taxes Your home was damaged by a hurricane. Amend taxes Relatives and neighbors made cash gifts to you that were excludable from your income. Amend taxes You used part of the cash gifts to pay for repairs to your home. Amend taxes There were no limits or restrictions on how you could use the cash gifts. Amend taxes Because it was an excludable gift, the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. Amend taxes Insurance payments for living expenses. Amend taxes   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. Amend taxes You lose the use of your main home because of a casualty. Amend taxes Government authorities do not allow you access to your main home because of a casualty or threat of one. Amend taxes Inclusion in income. Amend taxes   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. Amend taxes Report this amount on Form 1040, line 21. Amend taxes However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. Amend taxes See Qualified disaster relief payments, under Disaster Area Losses in Publication 547. Amend taxes   A temporary increase in your living expenses is the difference between the actual living expenses you and your family incurred during the period you could not use your home and your normal living expenses for that period. Amend taxes Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. Amend taxes Generally, these expenses include the amounts you pay for the following. Amend taxes Rent for suitable housing. Amend taxes Transportation. Amend taxes Food. Amend taxes Utilities. Amend taxes Miscellaneous services. Amend taxes Normal living expenses consist of these same expenses that you would have incurred but did not because of the casualty or the threat of one. Amend taxes Example. Amend taxes As a result of a fire, you vacated your apartment for a month and moved to a motel. Amend taxes You normally pay $525 a month for rent. Amend taxes None was charged for the month the apartment was vacated. Amend taxes Your motel rent for this month was $1,200. Amend taxes You normally pay $200 a month for food. Amend taxes Your food expenses for the month you lived in the motel were $400. Amend taxes You received $1,100 from your insurance company to cover your living expenses. Amend taxes You determine the payment you must include in income as follows. Amend taxes 1) Insurance payment for living expenses $1,100 2) Actual expenses during the month you are unable to use your home because of fire 1,600   3) Normal living expenses 725   4) Temporary increase in living  expenses: Subtract line 3 from line 2 875 5) Amount of payment includible  in income: Subtract line 4  from line 1 $ 225 Tax year of inclusion. Amend taxes   You include the taxable part of the insurance payment in income for the year you regain the use of your main home or, if later, for the year you receive the taxable part of the insurance payment. Amend taxes Example. Amend taxes Your main home was destroyed by a tornado in August 2011. Amend taxes You regained use of your home in November 2012. Amend taxes The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. Amend taxes You include this amount in income on your 2012 Form 1040. Amend taxes If, in 2013, you receive further payments to cover the living expenses you had in 2011 and 2012, you must include those payments in income on your 2013 Form 1040. Amend taxes Disaster relief. Amend taxes   Food, medical supplies, and other forms of assistance you receive do not reduce your casualty loss unless they are replacements for lost or destroyed property. Amend taxes Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster are not taxable income to you. Amend taxes For more information, see Disaster Area Losses in Publication 547. Amend taxes Disaster unemployment assistance payments are unemployment benefits that are taxable. Amend taxes Generally, disaster relief grants and qualified disaster mitigation payments made under the Robert T. Amend taxes Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not includible in your income. Amend taxes See Disaster Area Losses in Publication 547. Amend taxes Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you receive your actual reimbursement. Amend taxes This section explains the adjustment you may have to make. Amend taxes Actual reimbursement less than expected. Amend taxes   If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement. Amend taxes Example. Amend taxes Your personal car had an FMV of $2,000 when it was destroyed in a collision with another car in 2012. Amend taxes The accident was due to the negligence of the other driver. Amend taxes At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. Amend taxes You did not have a deductible loss in 2012. Amend taxes In January 2013, the court awarded you a judgment of $2,000. Amend taxes However, in July it became apparent that you will be unable to collect any amount from the other driver. Amend taxes You can deduct the loss in 2013 subject to the limits discussed later. Amend taxes Actual reimbursement more than expected. Amend taxes   If you later receive more reimbursement than you expected after you claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. Amend taxes However, if any part of the original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. Amend taxes You do not refigure your tax for the year you claimed the deduction. Amend taxes For more information, see Recoveries in chapter 12. Amend taxes If the total of all the reimbursements you receive is more than your adjusted basis in the destroyed or stolen property, you will have a gain on the casualty or theft. Amend taxes If you have already taken a deduction for a loss and you receive the reimbursement in a later year, you may have to include the gain in your income for the later year. Amend taxes Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. Amend taxes See Figuring a Gain in Publication 547 for more information on how to treat a gain from the reimbursement of a casualty or theft. Amend taxes Actual reimbursement same as expected. Amend taxes   If you receive exactly the reimbursement you expected to receive, you do not have to include any of the reimbursement in your income and you cannot deduct any additional loss. Amend taxes Example. Amend taxes In December 2013, you had a collision while driving your personal car. Amend taxes Repairs to the car cost $950. Amend taxes You had $100 deductible collision insurance. Amend taxes Your insurance company agreed to reimburse you for the rest of the damage. Amend taxes Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. Amend taxes Due to the $100 rule (discussed later under Deduction Limits ), you cannot deduct the $100 you paid as the deductible. Amend taxes When you receive the $850 from the insurance company in 2014, do not report it as income. Amend taxes Single Casualty on Multiple Properties Personal property. Amend taxes   Personal property is any property that is not real property. Amend taxes If your personal property is stolen or is damaged or destroyed by a casualty, you must figure your loss separately for each item of property. Amend taxes Then combine these separate losses to figure the total loss from that casualty or theft. Amend taxes Example. Amend taxes A fire in your home destroyed an upholstered chair, an oriental rug, and an antique table. Amend taxes You did not have fire insurance to cover your loss. Amend taxes (This was the only casualty or theft you had during the year. Amend taxes ) You paid $750 for the chair and you established that it had an FMV of $500 just before the fire. Amend taxes The rug cost $3,000 and had an FMV of $2,500 just before the fire. Amend taxes You bought the table at an auction for $100 before discovering it was an antique. Amend taxes It had been appraised at $900 before the fire. Amend taxes You figure your loss on each of these items as follows:     Chair Rug Table 1) Basis (cost) $750 $3,000 $100 2) FMV before fire $500 $2,500 $900 3) FMV after fire –0– –0– –0– 4) Decrease in FMV $500 $2,500 $900 5) Loss (smaller of (1) or  (4)) $500 $2,500 $100           6) Total loss     $3,100 Real property. Amend taxes   In figuring a casualty loss on personal-use real property, treat the entire property (including any improvements, such as buildings, trees, and shrubs) as one item. Amend taxes Figure the loss using the smaller of the adjusted basis or the decrease in FMV of the entire property. Amend taxes Example. Amend taxes You bought your home a few years ago. Amend taxes You paid $160,000 ($20,000 for the land and $140,000 for the house). Amend taxes You also spent $2,000 for landscaping. Amend taxes This year a fire destroyed your home. Amend taxes The fire also damaged the shrubbery and trees in your yard. Amend taxes The fire was your only casualty or theft loss this year. Amend taxes Competent appraisers valued the property as a whole at $200,000 before the fire, but only $30,000 after the fire. Amend taxes (The loss to your household furnishings is not shown in this example. Amend taxes It would be figured separately on each item, as explained earlier under Personal property . Amend taxes ) Shortly after the fire, the insurance company paid you $155,000 for the loss. Amend taxes You figure your casualty loss as follows: 1) Adjusted basis of the entire property (land, building, and landscaping) $162,000 2) FMV of entire property before fire $200,000 3) FMV of entire property after fire 30,000 4) Decrease in FMV of entire  property $170,000 5) Loss (smaller of (1) or (4)) $162,000 6) Subtract insurance 155,000 7) Amount of loss after reimbursement $7,000 Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. Amend taxes If the loss was to property for your personal use or your family's use, there are two limits on the amount you can deduct for your casualty or theft loss. Amend taxes You must reduce each casualty or theft loss by $100 ($100 rule). Amend taxes You must further reduce the total of all your casualty or theft losses by 10% of your adjusted gross income (10% rule). Amend taxes You make these reductions on Form 4684. Amend taxes These rules are explained next and Table 25-1 summarizes how to apply the $100 rule and the 10% rule in various situations. Amend taxes For more detailed explanations and examples, see Publication 547. Amend taxes Table 25-1. Amend taxes How To Apply the Deduction Limits for Personal-Use Property   $100 Rule 10% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. Amend taxes Apply this rule after you have figured the amount of your loss. Amend taxes You must reduce your total casualty or theft loss by 10% of your adjusted gross income. Amend taxes Apply this rule after you reduce each loss by $100 (the $100 rule). Amend taxes Single Event Apply this rule only once, even if many pieces of property are affected. Amend taxes Apply this rule only once, even if many pieces of property are affected. Amend taxes More Than One Event Apply to the loss from each event. Amend taxes Apply to the total of all your losses from all events. Amend taxes More Than One Person— With Loss From the Same Event (other than a married couple filing jointly) Apply separately to each person. Amend taxes Apply separately to each person. Amend taxes Married Couple—With Loss From the Same Event Filing Jointly Apply as if you were one person. Amend taxes Apply as if you were one person. Amend taxes Filing Separately Apply separately to each spouse. Amend taxes Apply separately to each spouse. Amend taxes More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. Amend taxes Apply separately to each owner of jointly owned property. Amend taxes Property used partly for business and partly for personal purposes. Amend taxes   When property is used partly for personal purposes and partly for business or income-producing purposes, the casualty or theft loss deduction must be figured separately for the personal-use part and for the business or income-producing part. Amend taxes You must figure each loss separately because the $100 rule and the 10% rule apply only to the loss on the personal-use part of the property. Amend taxes $100 Rule After you have figured your casualty or theft loss on personal-use property, you must reduce that loss by $100. Amend taxes This reduction applies to each total casualty or theft loss. Amend taxes It does not matter how many pieces of property are involved in an event. Amend taxes Only a single $100 reduction applies. Amend taxes Example. Amend taxes A hailstorm damages your home and your car. Amend taxes Determine the amount of loss, as discussed earlier, for each of these items. Amend taxes Since the losses are due to a single event, you combine the losses and reduce the combined amount by $100. Amend taxes Single event. Amend taxes   Generally, events closely related in origin cause a single casualty. Amend taxes It is a single casualty when the damage is from two or more closely related causes, such as wind and flood damage caused by the same storm. Amend taxes 10% Rule You must reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. Amend taxes Apply this rule after you reduce each loss by $100. Amend taxes For more information, see the Form 4684 instructions. Amend taxes If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. Amend taxes Example 1. Amend taxes In June, you discovered that your house had been burglarized. Amend taxes Your loss after insurance reimbursement was $2,000. Amend taxes Your adjusted gross income for the year you discovered the theft is $29,500. Amend taxes You first apply the $100 rule and then the 10% rule. Amend taxes Figure your theft loss deduction as follows. Amend taxes 1) Loss after insurance $2,000 2) Subtract $100 100 3) Loss after $100 rule $1,900 4) Subtract 10% × $29,500 AGI 2,950 5) Theft loss deduction –0– You do not have a theft loss deduction because your loss after you apply the $100 rule ($1,900) is less than 10% of your adjusted gross income ($2,950). Amend taxes Example 2. Amend taxes In March, you had a car accident that totally destroyed your car. Amend taxes You did not have collision insurance on your car, so you did not receive any insurance reimbursement. Amend taxes Your loss on the car was $1,800. Amend taxes In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items stored there. Amend taxes Your loss on the basement items after reimbursement was $2,100. Amend taxes Your adjusted gross income for the year that the accident and fire occurred is $25,000. Amend taxes You figure your casualty loss deduction as follows. Amend taxes       Base-     Car ment 1) Loss $1,800 $2,100 2) Subtract $100 per incident 100 100 3) Loss after $100 rule $1,700 $2,000 4) Total loss $3,700 5) Subtract 10% × $25,000 AGI 2,500 6) Casualty loss deduction $1,200 Gains and losses. Amend taxes   If you had both gains and losses from casualties or thefts to personal-use property, you must compare your total gains to your total losses. Amend taxes Do this after you have reduced each loss by any reimbursements and by $100, but before you have reduced the losses by 10% of your adjusted gross income. Amend taxes Casualty or theft gains do not include gains you choose to postpone. Amend taxes See Publication 547 for information on the postponement of gain. Amend taxes Losses more than gains. Amend taxes   If your losses are more than your recognized gains, subtract your gains from your losses and reduce the result by 10% of your adjusted gross income. Amend taxes The rest, if any, is your deductible loss from personal-use property. Amend taxes Gains more than losses. Amend taxes   If your recognized gains are more than your losses, subtract your losses from your gains. Amend taxes The difference is treated as capital gain and must be reported on Schedule D (Form 1040). Amend taxes The 10% rule does not apply to your gains. Amend taxes When To Report Gains and Losses Gains. Amend taxes   If you receive an insurance or other reimbursement that is more than your adjusted basis in the destroyed or stolen property, you have a gain from the casualty or theft. Amend taxes You must include this gain in your income in the year you receive the reimbursement, unless you choose to postpone reporting the gain as explained in Publication 547. Amend taxes If you have a loss, see Table 25-2 . Amend taxes Table 25-2. Amend taxes When To Deduct a Loss IF you have a loss. Amend taxes . Amend taxes . Amend taxes THEN deduct it in the year. Amend taxes . Amend taxes . Amend taxes from a casualty, the loss occurred. Amend taxes in a federally declared disaster area, the disaster occurred or the year immediately before the disaster. Amend taxes from a theft, the theft was discovered. Amend taxes on a deposit treated as a:   • casualty or any ordinary loss, a reasonable estimate can be made. Amend taxes • bad debt, deposits are totally worthless. Amend taxes Losses. Amend taxes   Generally, you can deduct a casualty loss that is not reimbursable only in the tax year in which the casualty occurred. Amend taxes This is true even if you do not repair or replace the damaged property until a later year. Amend taxes   You can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. Amend taxes   If you are not sure whether part of your casualty or theft loss will be reimbursed, do not deduct that part until the tax year when you become reasonably certain that it will not be reimbursed. Amend taxes Loss on deposits. Amend taxes   If your loss is a loss on deposits in an insolvent or bankrupt financial institution, see Loss on Deposits , earlier. Amend taxes Disaster Area Loss You generally must deduct a casualty loss in the year it occurred. Amend taxes However, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct the loss on your tax return or amended return for either of the following years. Amend taxes The year the disaster occurred. Amend taxes The year immediately preceding the year the disaster occurred. Amend taxes Gains. Amend taxes    Special rules apply if you choose to postpone reporting gain on property damaged or destroyed in a federally declared disaster area. Amend taxes For those special rules, see Publication 547. Amend taxes Postponed tax deadlines. Amend taxes   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. Amend taxes The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. Amend taxes   If any tax deadline is postponed, the IRS will publicize the postponement in your area by publishing a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Amend taxes Go to www. Amend taxes irs. Amend taxes gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. Amend taxes Who is eligible. Amend taxes   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Amend taxes Any individual whose main home is located in a covered disaster area (defined next). Amend taxes Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. Amend taxes Any individual who is a relief worker affiliated with a recognized government or philanthropic organization who is assisting in a covered disaster area. Amend taxes Any individual, business entity, or sole proprietorship whose records are needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. Amend taxes The main home or principal place of business does not have to be located in the covered disaster area. Amend taxes Any estate or trust that has tax records necessary to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. Amend taxes The spouse on a joint return with a taxpayer who is eligible for postponements. Amend taxes Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose records necessary to meet a postponed tax deadline are located in the covered disaster area. Amend taxes Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. Amend taxes Any other person determined by the IRS to be affected by a federally declared disaster. Amend taxes Covered disaster area. Amend taxes   This is an area of a federally declared disaster in which the IRS has decided to postpone tax deadlines for up to 1 year. Amend taxes Abatement of interest and penalties. Amend taxes   The IRS may abate the interest and penalties on underpaid income tax for the length of any postponement of tax deadlines. Amend taxes More information. Amend taxes   For more information, see Disaster Area Losses in Publication 547. Amend taxes How To Report Gains and Losses Use Form 4684 to report a gain or a deductible loss from a casualty or theft. Amend taxes If you have more than one casualty or theft, use a separate Form 4684 to determine your gain or loss for each event. Amend taxes Combine the gains and losses on one Form 4684. Amend taxes Follow the form instructions as to which lines to fill out. Amend taxes In addition, you must use the appropriate schedule to report a gain or loss. Amend taxes The schedule you use depends on whether you have a gain or loss. Amend taxes If you have a: Report it on: Gain Schedule D (Form 1040) Loss Schedule A (Form 1040) Adjustments to basis. Amend taxes   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. Amend taxes Amounts you spend to restore your property after a casualty increase your adjusted basis. Amend taxes See Adjusted Basis in chapter 13 for more information. Amend taxes Net operating loss (NOL). Amend taxes    If your casualty or theft loss deduction causes your deductions for the year to be more than your income for the year, you may have an NOL. Amend taxes You can use an NOL to lower your tax in an earlier year, allowing you to get a refund for tax you have already paid. Amend taxes Or, you can use it to lower your tax in a later year. Amend taxes You do not have to be in business to have an NOL from a casualty or theft loss. Amend taxes For more information, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. Amend taxes Prev  Up  Next   Home   More Online Publications