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Buy turbotax 2011 11. Buy turbotax 2011   Casualties, Thefts, and Condemnations Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Casualties and TheftsDeductible losses. Buy turbotax 2011 Nondeductible losses. Buy turbotax 2011 Family pet. Buy turbotax 2011 Progressive deterioration. Buy turbotax 2011 Decline in market value of stock. Buy turbotax 2011 Mislaid or lost property. Buy turbotax 2011 Farming Losses How To Figure a Loss Deduction Limits on Losses of Personal-Use Property When Loss Is Deductible Proof of Loss Figuring a Gain Other Involuntary ConversionsCondemnation Irrigation Project Livestock Losses Tree Seedlings Postponing GainException. Buy turbotax 2011 Related persons. Buy turbotax 2011 Replacement Property Replacement Period How To Postpone Gain Disaster Area LossesWho is eligible. Buy turbotax 2011 Covered disaster area. Buy turbotax 2011 Reporting Gains and Losses Introduction This chapter explains the tax treatment of casualties, thefts, and condemnations. Buy turbotax 2011 A casualty occurs when property is damaged, destroyed, or lost due to a sudden, unexpected, or unusual event. Buy turbotax 2011 A theft occurs when property is stolen. Buy turbotax 2011 A condemnation occurs when private property is legally taken for public use without the owner's consent. Buy turbotax 2011 A casualty, theft, or condemnation may result in a deductible loss or taxable gain on your federal income tax return. Buy turbotax 2011 You may have a deductible loss or a taxable gain even if only a portion of your property was affected by a casualty, theft, or condemnation. Buy turbotax 2011 An involuntary conversion occurs when you receive money or other property as reimbursement for a casualty, theft, condemnation, disposition of property under threat of condemnation, or certain other events discussed in this chapter. Buy turbotax 2011 If an involuntary conversion results in a gain and you buy qualified replacement property within the specified replacement period, you can postpone reporting the gain on your income tax return. Buy turbotax 2011 For more information, see Postponing Gain , later. Buy turbotax 2011 Topics - This chapter discusses: Casualties and thefts How to figure a loss or gain Other involuntary conversions Postponing gain Disaster area losses Reporting gains and losses Drought involving property connected with a trade or business or a transaction entered into for profit Useful Items - You may want to see: Publication 523 Selling Your Home 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 544 Sales and Other Dispositions of Assets 547 Casualties, Disasters, and Thefts 584 Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property) 584-B Business Casualty, Disaster, and Theft Loss Workbook Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch D (Form 1040) Capital Gains and Losses Sch F (Form 1040) Profit or Loss From Farming 4684 Casualties and Thefts 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Buy turbotax 2011 Casualties and Thefts If your property is destroyed, damaged, or stolen, you may have a deductible loss. Buy turbotax 2011 If the insurance or other reimbursement is more than the adjusted basis of the destroyed, damaged, or stolen property, you may have a taxable gain. Buy turbotax 2011 Casualty. Buy turbotax 2011   A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Buy turbotax 2011 A sudden event is one that is swift, not gradual or progressive. Buy turbotax 2011 An unexpected event is one that is ordinarily unanticipated and unintended. Buy turbotax 2011 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. Buy turbotax 2011 Deductible losses. Buy turbotax 2011   Deductible casualty losses can result from a number of different causes, including the following. Buy turbotax 2011 Airplane crashes. Buy turbotax 2011 Car, truck, or farm equipment accidents not resulting from your willful act or willful negligence. Buy turbotax 2011 Earthquakes. Buy turbotax 2011 Fires (but see Nondeductible losses next for exceptions). Buy turbotax 2011 Floods. Buy turbotax 2011 Freezing. Buy turbotax 2011 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. Buy turbotax 2011 Lightning. Buy turbotax 2011 Storms, including hurricanes and tornadoes. Buy turbotax 2011 Terrorist attacks. Buy turbotax 2011 Vandalism. Buy turbotax 2011 Volcanic eruptions. Buy turbotax 2011 Nondeductible losses. Buy turbotax 2011   A casualty loss is not deductible if the damage or destruction is caused by the following. Buy turbotax 2011 Accidentally breaking articles such as glassware or china under normal conditions. Buy turbotax 2011 A family pet (explained below). Buy turbotax 2011 A fire if you willfully set it, or pay someone else to set it. Buy turbotax 2011 A car, truck, or farm equipment accident if your willful negligence or willful act caused it. Buy turbotax 2011 The same is true if the willful act or willful negligence of someone acting for you caused the accident. Buy turbotax 2011 Progressive deterioration (explained below). Buy turbotax 2011 Family pet. Buy turbotax 2011   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed above under Casualty are met. Buy turbotax 2011 Example. Buy turbotax 2011 You keep your horse in your yard. Buy turbotax 2011 The ornamental fruit trees in your yard were damaged when your horse stripped the bark from them. Buy turbotax 2011 Some of the trees were completely girdled and died. Buy turbotax 2011 Because the damage was not unexpected or unusual, the loss is not deductible. Buy turbotax 2011 Progressive deterioration. Buy turbotax 2011   Loss of property due to progressive deterioration is not deductible as a casualty loss. Buy turbotax 2011 This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Buy turbotax 2011 Examples of damage due to progressive deterioration include damage from rust, corrosion, or termites. Buy turbotax 2011 However, weather-related conditions or disease may cause another type of involuntary conversion. Buy turbotax 2011 See Other Involuntary Conversions , later. Buy turbotax 2011 Theft. Buy turbotax 2011   A theft is the taking and removing of money or property with the intent to deprive the owner of it. Buy turbotax 2011 The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent. Buy turbotax 2011 You do not need to show a conviction for theft. Buy turbotax 2011   Theft includes the taking of money or property by the following means: Blackmail, Burglary, Embezzlement, Extortion, Kidnapping for ransom, Larceny, Robbery, or Threats. Buy turbotax 2011 The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Buy turbotax 2011 Decline in market value of stock. Buy turbotax 2011   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. Buy turbotax 2011 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. Buy turbotax 2011 You report a capital loss on Schedule D (Form 1040). Buy turbotax 2011 For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Buy turbotax 2011 Mislaid or lost property. Buy turbotax 2011   The simple disappearance of money or property is not a theft. Buy turbotax 2011 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. Buy turbotax 2011 Example. Buy turbotax 2011 A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Buy turbotax 2011 The diamond falls from the ring and is never found. Buy turbotax 2011 The loss of the diamond is a casualty. Buy turbotax 2011 Farming Losses You can deduct certain casualty or theft losses that occur in the business of farming. Buy turbotax 2011 The following is a discussion of some losses you can deduct and some you cannot deduct. Buy turbotax 2011 Livestock or produce bought for resale. Buy turbotax 2011   Casualty or theft losses of livestock or produce bought for resale are deductible if you report your income on the cash method. Buy turbotax 2011 If you report your income on an accrual method, take casualty and theft losses on property bought for resale by omitting the item from the closing inventory for the year of the loss. Buy turbotax 2011 You cannot take a separate deduction. Buy turbotax 2011 Livestock, plants, produce, and crops raised for sale. Buy turbotax 2011   Losses of livestock, plants, produce, and crops raised for sale are generally not deductible if you report your income on the cash method. Buy turbotax 2011 You have already deducted the cost of raising these items as farm expenses, so their basis is equal to zero. Buy turbotax 2011   For plants with a preproductive period of more than 2 years, you may have a deductible loss if you have a tax basis in the plants. Buy turbotax 2011 You usually have a tax basis if you capitalized the expenses associated with these plants under the uniform capitalization rules. Buy turbotax 2011 The uniform capitalization rules are discussed in chapter 6. Buy turbotax 2011   If you report your income on an accrual method, casualty or theft losses are deductible only if you included the items in your inventory at the beginning of your tax year. Buy turbotax 2011 You get the deduction by omitting the item from your inventory at the close of your tax year. Buy turbotax 2011 You cannot take a separate casualty or theft deduction. Buy turbotax 2011 Income loss. Buy turbotax 2011   A loss of future income is not deductible. Buy turbotax 2011 Example. Buy turbotax 2011 A severe flood destroyed your crops. Buy turbotax 2011 Because you are a cash method taxpayer and already deducted the cost of raising the crops as farm expenses, this loss is not deductible, as explained above under Livestock, plants, produce, and crops raised for sale . Buy turbotax 2011 You estimate that the crop loss will reduce your farm income by $25,000. Buy turbotax 2011 This loss of future income is also not deductible. Buy turbotax 2011 Loss of timber. Buy turbotax 2011   If you sell timber downed as a result of a casualty, treat the proceeds from the sale as a reimbursement. Buy turbotax 2011 If you use the proceeds to buy qualified replacement property, you can postpone reporting the gain. Buy turbotax 2011 See Postponing Gain , later. Buy turbotax 2011 Property used in farming. Buy turbotax 2011   Casualty and theft losses of property used in your farm business usually result in deductible losses. Buy turbotax 2011 If a fire or storm destroyed your barn, or you lose by casualty or theft an animal you bought for draft, breeding, dairy, or sport, you may have a deductible loss. Buy turbotax 2011 See How To Figure a Loss , later. Buy turbotax 2011 Raised draft, breeding, dairy, or sporting animals. Buy turbotax 2011   Generally, losses of raised draft, breeding, dairy, or sporting animals do not result in deductible casualty or theft losses because you have no basis in the animals. Buy turbotax 2011 However, you may have a basis in the animal and therefore may be able to claim a deduction if either of the following situations applies to you. Buy turbotax 2011 You use inventories to determine your income and you included the animals in your inventory. Buy turbotax 2011 You capitalized the expenses associated with the animals under the uniform capitalization rules and therefore have a tax basis in the animals subject to a casualty or theft. Buy turbotax 2011 When you include livestock in inventory, its last inventory value is its basis. Buy turbotax 2011 When you lose an inventoried animal held for draft, breeding, dairy, or sport by casualty or theft during the year, decrease ending inventory by the amount you included in inventory for the animal. Buy turbotax 2011 You cannot take a separate deduction. Buy turbotax 2011 How To Figure a Loss How you figure a deductible casualty or theft loss depends on whether the loss was to farm or personal-use property and whether the property was stolen or partly or completely destroyed. Buy turbotax 2011 Farm property. Buy turbotax 2011   Farm property is the property you use in your farming business. Buy turbotax 2011 If your farm property was completely destroyed or stolen, your loss is figured as follows:      Your adjusted basis in the property     MINUS     Any salvage value     MINUS     Any insurance or other reimbursement you  receive or expect to receive      You can use the schedules in Publication 584-B to list your stolen, damaged, or destroyed business property and to figure your loss. Buy turbotax 2011   If your farm property was partially damaged, use the steps shown under Personal-use property next to figure your casualty loss. Buy turbotax 2011 However, the deduction limits, discussed later, do not apply to farm property. Buy turbotax 2011 Personal-use property. Buy turbotax 2011   Personal-use property is property used by you or your family members for personal purposes and not used in your farm business or for income-producing purposes. Buy turbotax 2011 The following items are examples of personal-use property: Your main home. Buy turbotax 2011 Furniture and electronics used in your main home and not used in a home office or for business purposes. Buy turbotax 2011 Clothing and jewelry. Buy turbotax 2011 An automobile used for nonbusiness purposes. Buy turbotax 2011 You figure the casualty or theft loss on this property by taking the following steps. Buy turbotax 2011 Determine your adjusted basis in the property before the casualty or theft. Buy turbotax 2011 Determine the decrease in fair market value of the property as a result of the casualty or theft. Buy turbotax 2011 From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you receive or expect to receive. Buy turbotax 2011 You must apply the deduction limits, discussed later, to determine your deductible loss. Buy turbotax 2011    You can use Publication 584 to list your stolen or damaged personal-use property and figure your loss. Buy turbotax 2011 It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. Buy turbotax 2011 Adjusted basis. Buy turbotax 2011   Adjusted basis is your basis (usually cost) increased or decreased by various events, such as improvements and casualty losses. Buy turbotax 2011 For more information about adjusted basis, see chapter 6. Buy turbotax 2011 Decrease in fair market value (FMV). Buy turbotax 2011   The decrease in FMV is the difference between the property's value immediately before the casualty or theft and its value immediately afterward. Buy turbotax 2011 FMV is defined in chapter 10 under Payments Received or Considered Received . Buy turbotax 2011 Appraisal. Buy turbotax 2011   To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. Buy turbotax 2011 But other measures, such as the cost of cleaning up or making repairs (discussed next) can be used to establish decreases in FMV. Buy turbotax 2011   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. Buy turbotax 2011 The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Buy turbotax 2011 This information is needed to limit any deduction to the actual loss resulting from damage to the property. Buy turbotax 2011 Cost of cleaning up or making repairs. Buy turbotax 2011   The cost of cleaning up after a casualty is not part of a casualty loss. Buy turbotax 2011 Neither is the cost of repairing damaged property after a casualty. Buy turbotax 2011 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. Buy turbotax 2011 The repairs are actually made. Buy turbotax 2011 The repairs are necessary to bring the property back to its condition before the casualty. Buy turbotax 2011 The amount spent for repairs is not excessive. Buy turbotax 2011 The repairs fix the damage only. Buy turbotax 2011 The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Buy turbotax 2011 Related expenses. Buy turbotax 2011   The incidental expenses due to a casualty or theft, such as expenses for the treatment of personal injuries, temporary housing, or a rental car, are not part of your casualty or theft loss. Buy turbotax 2011 However, they may be deductible as farm business expenses if the damaged or stolen property is farm property. Buy turbotax 2011 Separate computations for more than one item of property. Buy turbotax 2011   Generally, if a single casualty or theft involves more than one item of property, you must figure your loss separately for each item of property. Buy turbotax 2011 Then combine the losses to determine your total loss. Buy turbotax 2011    There is an exception to this rule for personal-use real property. Buy turbotax 2011 See Exception for personal-use real property, later. Buy turbotax 2011 Example. Buy turbotax 2011 A fire on your farm damaged a tractor and the barn in which it was stored. Buy turbotax 2011 The tractor had an adjusted basis of $3,300. Buy turbotax 2011 Its FMV was $28,000 just before the fire and $10,000 immediately afterward. Buy turbotax 2011 The barn had an adjusted basis of $28,000. Buy turbotax 2011 Its FMV was $55,000 just before the fire and $25,000 immediately afterward. Buy turbotax 2011 You received insurance reimbursements of $2,100 on the tractor and $26,000 on the barn. Buy turbotax 2011 Figure your deductible casualty loss separately for the two items of property. Buy turbotax 2011     Tractor Barn 1) Adjusted basis $3,300 $28,000 2) FMV before fire $28,000 $55,000 3) FMV after fire 10,000 25,000 4) Decrease in FMV  (line 2 − line 3) $18,000 $30,000 5) Loss (lesser of line 1 or line 4) $3,300 $28,000 6) Minus: Insurance 2,100 26,000 7) Deductible casualty loss $1,200 $2,000 8) Total deductible casualty loss $3,200 Exception for personal-use real property. Buy turbotax 2011   In figuring a casualty loss on personal-use real property, the entire property (including any improvements, such as buildings, trees, and shrubs) is treated as one item. Buy turbotax 2011 Figure the loss using the smaller of the following. Buy turbotax 2011 The decrease in FMV of the entire property. Buy turbotax 2011 The adjusted basis of the entire property. Buy turbotax 2011 Example. Buy turbotax 2011 You bought a farm in 1990 for $160,000. Buy turbotax 2011 The adjusted basis of the residential part is now $128,000. Buy turbotax 2011 In 2013, a windstorm blew down shade trees and three ornamental trees planted at a cost of $7,500 on the residential part. Buy turbotax 2011 The adjusted basis of the residential part includes the $7,500. Buy turbotax 2011 The fair market value (FMV) of the residential part immediately before the storm was $400,000, and $385,000 immediately after the storm. Buy turbotax 2011 The trees were not covered by insurance. Buy turbotax 2011 1) Adjusted basis $128,000 2) FMV before the storm $400,000 3) FMV after the storm 385,000 4) Decrease in FMV (line 2 − line 3) $15,000 5) Loss before insurance (lesser of line 1 or line 4) $15,000 6) Minus: Insurance -0- 7) Amount of loss $15,000 Insurance and other reimbursements. Buy turbotax 2011   If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Buy turbotax 2011 You do not have a casualty or theft loss to the extent you are reimbursed. Buy turbotax 2011   If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Buy turbotax 2011 You must reduce your loss even if you do not receive payment until a later tax year. Buy turbotax 2011    Do not subtract from your loss any insurance payments you receive for living expenses if you lose the use of your main home or are denied access to it because of a casualty. Buy turbotax 2011 You may have to include a portion of these payments in your income. Buy turbotax 2011 See Insurance payments for living expenses in Publication 547 for details. Buy turbotax 2011 Disaster relief. Buy turbotax 2011   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. Buy turbotax 2011 Excludable cash gifts you receive also do not reduce your casualty loss if there are no limits on how you can use the money. Buy turbotax 2011   Generally, disaster relief grants received under the Robert T. Buy turbotax 2011 Stafford Disaster Relief and Emergency Assistance Act are not included in your income. Buy turbotax 2011 See Federal disaster relief grants , later, under Disaster Area Losses . Buy turbotax 2011   Qualified disaster relief payments for expenses you incurred as a result of a federally declared disaster are not taxable income to you. Buy turbotax 2011 See Qualified disaster relief payments , later, under Disaster Area Losses . Buy turbotax 2011 Reimbursement received after deducting loss. Buy turbotax 2011   If you figure your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you get your actual reimbursement. Buy turbotax 2011 Actual reimbursement less than expected. Buy turbotax 2011   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. Buy turbotax 2011 Actual reimbursement more than expected. Buy turbotax 2011   If you later receive more reimbursement than you expected after you have claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. Buy turbotax 2011 However, if any part of your original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. Buy turbotax 2011 Do not refigure your tax for the year you claimed the deduction. Buy turbotax 2011 See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. Buy turbotax 2011 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. Buy turbotax 2011 See Figuring a Gain in Publication 547 for information on how to treat a gain from the reimbursement you receive because of a casualty or theft. Buy turbotax 2011 Actual reimbursement same as expected. Buy turbotax 2011   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. Buy turbotax 2011 Lump-sum reimbursement. Buy turbotax 2011   If you have a casualty or theft loss of several assets at the same time without an allocation of reimbursement to specific assets, divide the lump-sum reimbursement among the assets according to the fair market value of each asset at the time of the loss. Buy turbotax 2011 Figure the gain or loss separately for each asset that has a separate basis. Buy turbotax 2011 Adjustments to basis. Buy turbotax 2011   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. Buy turbotax 2011 The result is your adjusted basis in the property. Buy turbotax 2011 Amounts you spend on repairs to restore your property to its pre-casualty condition increase your adjusted basis. Buy turbotax 2011 See Adjusted Basis in chapter 6 for more information. Buy turbotax 2011 Example. Buy turbotax 2011 You built a new silo for $25,000. Buy turbotax 2011 This is the basis in your silo because that is the total cost you incurred to build it. Buy turbotax 2011 During the year, a tornado damaged your silo and your allowable casualty loss deduction was $1,000. Buy turbotax 2011 In addition, your insurance company reimbursed you $4,000 for the damage and you spent $6,000 to restore the silo to its pre-casualty condition. Buy turbotax 2011 Your adjusted basis in the silo after the casualty is $26,000 ($25,000 - $1,000 - $4,000 + $6,000). Buy turbotax 2011 Deduction Limits on Losses of Personal-Use Property Casualty and theft losses of property held for personal use may be deductible if you itemize deductions on Schedule A (Form 1040). Buy turbotax 2011 There are two limits on the deduction for casualty or theft loss of personal-use property. Buy turbotax 2011 You figure these limits on Form 4684. Buy turbotax 2011 $100 rule. Buy turbotax 2011   You must reduce each casualty or theft loss on personal-use property by $100. Buy turbotax 2011 This rule applies after you have subtracted any reimbursement. Buy turbotax 2011 10% rule. Buy turbotax 2011   You must further reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. Buy turbotax 2011 Apply this rule after you reduce each loss by $100. Buy turbotax 2011 Adjusted gross income is on line 38 of Form 1040. Buy turbotax 2011 Example. Buy turbotax 2011 In June, you discovered that your house had been burglarized. Buy turbotax 2011 Your loss after insurance reimbursement was $2,000. Buy turbotax 2011 Your adjusted gross income for the year you discovered the burglary is $57,000. Buy turbotax 2011 Figure your theft loss deduction as follows: 1. Buy turbotax 2011 Loss after insurance $2,000 2. Buy turbotax 2011 Subtract $100 100 3. Buy turbotax 2011 Loss after $100 rule $1,900 4. Buy turbotax 2011 Subtract 10% (. Buy turbotax 2011 10) × $57,000 AGI $5,700 5. Buy turbotax 2011 Theft loss deduction -0- You do not have a theft loss deduction because your loss ($1,900) is less than 10% of your adjusted gross income ($5,700). Buy turbotax 2011    If you have a casualty or theft gain in addition to a loss, you will have to make a special computation before you figure your 10% limit. Buy turbotax 2011 See 10% Rule in Publication 547. Buy turbotax 2011 When Loss Is Deductible Generally, you can deduct casualty losses that are not reimbursable only in the tax year in which they occur. Buy turbotax 2011 You generally can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. Buy turbotax 2011 However, losses in federally declared disaster areas are subject to different rules. Buy turbotax 2011 See Disaster Area Losses , later, for an exception. Buy turbotax 2011 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. Buy turbotax 2011 Leased property. Buy turbotax 2011   If you lease property from someone else, you can deduct a loss on the property in the year your liability for the loss is fixed. Buy turbotax 2011 This is true even if the loss occurred or the liability was paid in a different year. Buy turbotax 2011 You are not entitled to a deduction until your liability under the lease can be determined with reasonable accuracy. Buy turbotax 2011 Your liability can be determined when a claim for recovery is settled, adjudicated, or abandoned. Buy turbotax 2011 Example. Buy turbotax 2011 Robert leased a tractor from First Implement, Inc. Buy turbotax 2011 , for use in his farm business. Buy turbotax 2011 The tractor was destroyed by a tornado in June 2012. Buy turbotax 2011 The loss was not insured. Buy turbotax 2011 First Implement billed Robert for the fair market value of the tractor on the date of the loss. Buy turbotax 2011 Robert disagreed with the bill and refused to pay it. Buy turbotax 2011 First Implement later filed suit in court against Robert. Buy turbotax 2011 In 2013, Robert and First Implement agreed to settle the suit for $20,000, and the court entered a judgment in favor of First Implement. Buy turbotax 2011 Robert paid $20,000 in June 2013. Buy turbotax 2011 He can claim the $20,000 as a loss on his 2013 tax return. Buy turbotax 2011 Net operating loss (NOL). Buy turbotax 2011   If your deductions, including casualty or theft loss deductions, are more than your income for the year, you may have an NOL. Buy turbotax 2011 An NOL can be carried back or carried forward and deducted from income in other years. Buy turbotax 2011 See Publication 536 for more information on NOLs. Buy turbotax 2011 Proof of Loss To deduct a casualty or theft loss, you must be able to prove that there was a casualty or theft. Buy turbotax 2011 You must have records to support the amount you claim for the loss. Buy turbotax 2011 Casualty loss proof. Buy turbotax 2011   For a casualty loss, your records should show all the following information. Buy turbotax 2011 The type of casualty (car accident, fire, storm, etc. Buy turbotax 2011 ) and when it occurred. Buy turbotax 2011 That the loss was a direct result of the casualty. Buy turbotax 2011 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. Buy turbotax 2011 Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Buy turbotax 2011 Theft loss proof. Buy turbotax 2011   For a theft loss, your records should show all the following information. Buy turbotax 2011 When you discovered your property was missing. Buy turbotax 2011 That your property was stolen. Buy turbotax 2011 That you were the owner of the property. Buy turbotax 2011 Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Buy turbotax 2011 Figuring a Gain A casualty or theft may result in a taxable gain. Buy turbotax 2011 If you receive an insurance payment or other reimbursement that is more than your adjusted basis in the destroyed, damaged, or stolen property, you have a gain from the casualty or theft. Buy turbotax 2011 You generally report your gain as income in the year you receive the reimbursement. Buy turbotax 2011 However, depending on the type of property you receive, you may not have to report your gain. Buy turbotax 2011 See Postponing Gain , later. Buy turbotax 2011 Your gain is figured as follows: The amount you receive, minus Your adjusted basis in the property at the time of the casualty or theft. Buy turbotax 2011 Even if the decrease in FMV of your property is smaller than the adjusted basis of your property, use your adjusted basis to figure the gain. Buy turbotax 2011 Amount you receive. Buy turbotax 2011   The amount you receive includes any money plus the value of any property you receive, minus any expenses you have in obtaining reimbursement. Buy turbotax 2011 It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. Buy turbotax 2011 Example. Buy turbotax 2011 A tornado severely damaged your barn. Buy turbotax 2011 The adjusted basis of the barn was $25,000. Buy turbotax 2011 Your insurance company reimbursed you $40,000 for the damaged barn. Buy turbotax 2011 However, you had legal expenses of $2,000 to collect that insurance. Buy turbotax 2011 Your insurance minus your expenses to collect the insurance is more than your adjusted basis in the barn, so you have a gain. Buy turbotax 2011 1) Insurance reimbursement $40,000 2) Legal expenses 2,000 3) Amount received  (line 1 − line 2) $38,000 4) Adjusted basis 25,000 5) Gain on casualty (line 3 − line 4) $13,000 Other Involuntary Conversions In addition to casualties and thefts, other events cause involuntary conversions of property. Buy turbotax 2011 Some of these are discussed in the following paragraphs. Buy turbotax 2011 Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes. Buy turbotax 2011 You report the gain or deduct the loss on your tax return for the year you realize it. Buy turbotax 2011 However, depending on the type of property you receive, you may not have to report your gain on the involuntary conversion. Buy turbotax 2011 See Postponing Gain , later. Buy turbotax 2011 Condemnation Condemnation is the process by which private property is legally taken for public use without the owner's consent. Buy turbotax 2011 The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take property. Buy turbotax 2011 The owner receives a condemnation award (money or property) in exchange for the property taken. Buy turbotax 2011 A condemnation is a forced sale, the owner being the seller and the condemning authority being the buyer. Buy turbotax 2011 Threat of condemnation. Buy turbotax 2011   Treat the sale of your property under threat of condemnation as a condemnation, provided you have reasonable grounds to believe that your property will be condemned. Buy turbotax 2011 Main home condemned. Buy turbotax 2011   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. Buy turbotax 2011 For information on this exclusion, see Publication 523. Buy turbotax 2011 If your gain is more than the amount you can exclude, but you buy replacement property, you may be able to postpone reporting the excess gain. Buy turbotax 2011 See Postponing Gain , later. Buy turbotax 2011 (You cannot deduct a loss from the condemnation of your main home. Buy turbotax 2011 ) More information. Buy turbotax 2011   For information on how to figure the gain or loss on condemned property, see chapter 1 in Publication 544. Buy turbotax 2011 Also see Postponing Gain , later, to find out if you can postpone reporting the gain. Buy turbotax 2011 Irrigation Project The sale or other disposition of property located within an irrigation project to conform to the acreage limits of federal reclamation laws is an involuntary conversion. Buy turbotax 2011 Livestock Losses Diseased livestock. Buy turbotax 2011   If your livestock die from disease, or are destroyed, sold, or exchanged because of disease, even though the disease is not of epidemic proportions, treat these occurrences as involuntary conversions. Buy turbotax 2011 If the livestock were raised or purchased for resale, follow the rules for livestock discussed earlier under Farming Losses . Buy turbotax 2011 Otherwise, figure the gain or loss from these conversions using the rules discussed under Determining Gain or Loss in chapter 8. Buy turbotax 2011 If you replace the livestock, you may be able to postpone reporting the gain. Buy turbotax 2011 See Postponing Gain below. Buy turbotax 2011 Reporting dispositions of diseased livestock. Buy turbotax 2011   If you choose to postpone reporting gain on the disposition of diseased livestock, you must attach a statement to your return explaining that the livestock were disposed of because of disease. Buy turbotax 2011 You must also include other information on this statement. Buy turbotax 2011 See How To Postpone Gain , later, under Postponing Gain . Buy turbotax 2011 Weather-related sales of livestock. Buy turbotax 2011   If you sell or exchange livestock (other than poultry) held for draft, breeding, or dairy purposes solely because of drought, flood, or other weather-related conditions, treat the sale or exchange as an involuntary conversion. Buy turbotax 2011 Only livestock sold in excess of the number you normally would sell under usual business practice, in the absence of weather-related conditions, are considered involuntary conversions. Buy turbotax 2011 Figure the gain or loss using the rules discussed under Determining Gain or Loss in chapter 8. Buy turbotax 2011 If you replace the livestock, you may be able to postpone reporting the gain. Buy turbotax 2011 See Postponing Gain below. Buy turbotax 2011 Example. Buy turbotax 2011 It is your usual business practice to sell five of your dairy animals during the year. Buy turbotax 2011 This year you sold 20 dairy animals because of drought. Buy turbotax 2011 The sale of 15 animals is treated as an involuntary conversion. Buy turbotax 2011    If you do not replace the livestock, you may be able to report the gain in the following year's income. Buy turbotax 2011 This rule also applies to other livestock (including poultry). Buy turbotax 2011 See Sales Caused by Weather-Related Conditions in chapter 3. Buy turbotax 2011 Tree Seedlings If, because of an abnormal drought, the failure of planted tree seedlings is greater than normally anticipated, you may have a deductible loss. Buy turbotax 2011 Treat the loss as a loss from an involuntary conversion. Buy turbotax 2011 The loss equals the previously capitalized reforestation costs you had to duplicate on replanting. Buy turbotax 2011 You deduct the loss on the return for the year the seedlings died. Buy turbotax 2011 Postponing Gain Do not report a gain if you receive reimbursement in the form of property similar or related in service or use to the destroyed, stolen, or other involuntarily converted property. Buy turbotax 2011 Your basis in the new property is generally the same as your adjusted basis in the property it replaces. Buy turbotax 2011 You must ordinarily report the gain on your stolen, destroyed, or other involuntarily converted property if you receive money or unlike property as reimbursement. Buy turbotax 2011 However, you can choose to postpone reporting the gain if you purchase replacement property similar or related in service or use to your destroyed, stolen, or other involuntarily converted property within a specific replacement period. Buy turbotax 2011 If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. Buy turbotax 2011 To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. Buy turbotax 2011 If the cost of the replacement property is less than the reimbursement, you must include the gain in your income up to the amount of the unspent reimbursement. Buy turbotax 2011 Example 1. Buy turbotax 2011 In 1985, you constructed a barn to store farm equipment at a cost of $20,000. Buy turbotax 2011 In 1987, you added a silo to the barn at a cost of $15,000 to store grain. Buy turbotax 2011 In May of this year, the property was worth $100,000. Buy turbotax 2011 In June the barn and silo were destroyed by a tornado. Buy turbotax 2011 At the time of the tornado, you had an adjusted basis of $0 in the property. Buy turbotax 2011 You received $85,000 from the insurance company. Buy turbotax 2011 You had a gain of $85,000 ($85,000 – $0). Buy turbotax 2011 You spent $80,000 to rebuild the barn and silo. Buy turbotax 2011 Since this is less than the insurance proceeds received, you must include $5,000 ($85,000 – $80,000) in your income. Buy turbotax 2011 Example 2. Buy turbotax 2011 In 1970, you bought a cabin in the mountains for your personal use at a cost of $18,000. Buy turbotax 2011 You made no further improvements or additions to it. Buy turbotax 2011 When a storm destroyed the cabin this January, the cabin was worth $250,000. Buy turbotax 2011 You received $146,000 from the insurance company in March. Buy turbotax 2011 You had a gain of $128,000 ($146,000 − $18,000). Buy turbotax 2011 You spent $144,000 to rebuild the cabin. Buy turbotax 2011 Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. Buy turbotax 2011 Buying replacement property from a related person. Buy turbotax 2011   You cannot postpone reporting a gain from a casualty, theft, or other involuntary conversion if you buy the replacement property from a related person (discussed later). Buy turbotax 2011 This rule applies to the following taxpayers. Buy turbotax 2011 C corporations. Buy turbotax 2011 Partnerships in which more than 50% of the capital or profits interest is owned by C corporations. Buy turbotax 2011 Individuals, partnerships (other than those in (2) above), and S corporations if the total realized gain for the tax year on all involuntarily converted properties on which there are realized gains is more than $100,000. Buy turbotax 2011 For involuntary conversions described in (3) above, gains cannot be offset by any losses when determining whether the total gain is more than $100,000. Buy turbotax 2011 If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Buy turbotax 2011 If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Buy turbotax 2011 Exception. Buy turbotax 2011   This rule does not apply if the related person acquired the property from an unrelated person within the period of time allowed for replacing the involuntarily converted property. Buy turbotax 2011 Related persons. Buy turbotax 2011   Under this rule, related persons include, for example, a parent and child, a brother and sister, a corporation and an individual who owns more than 50% of its outstanding stock, and two partnerships in which the same C corporations own more than 50% of the capital or profits interests. Buy turbotax 2011 For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Buy turbotax 2011 Death of a taxpayer. Buy turbotax 2011   If a taxpayer dies after having a gain, but before buying replacement property, the gain must be reported for the year in which the decedent realized the gain. Buy turbotax 2011 The executor of the estate or the person succeeding to the funds from the involuntary conversion cannot postpone reporting the gain by buying replacement property. Buy turbotax 2011 Replacement Property You must buy replacement property for the specific purpose of replacing your property. Buy turbotax 2011 Your replacement property must be similar or related in service or use to the property it replaces. Buy turbotax 2011 You do not have to use the same funds you receive as reimbursement for your old property to acquire the replacement property. Buy turbotax 2011 If you spend the money you receive for other purposes, and borrow money to buy replacement property, you can still choose to postpone reporting the gain if you meet the other requirements. Buy turbotax 2011 Property you acquire by gift or inheritance does not qualify as replacement property. Buy turbotax 2011 Owner-user. Buy turbotax 2011   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. Buy turbotax 2011 Examples of property that functions in the same way as the property it replaces are a home that replaces another home, a dairy cow that replaces another dairy cow, and farm land that replaces other farm land. Buy turbotax 2011 A grinding mill that replaces a tractor does not qualify. Buy turbotax 2011 Neither does a breeding or draft animal that replaces a dairy cow. Buy turbotax 2011 Soil or other environmental contamination. Buy turbotax 2011   If, because of soil or other environmental contamination, it is not feasible for you to reinvest your insurance money or other proceeds from destroyed or damaged livestock in property similar or related in service or use to the livestock, you can treat other property (including real property) used for farming purposes, as property similar or related in service or use to the destroyed or damaged livestock. Buy turbotax 2011 Weather-related conditions. Buy turbotax 2011   If, because of drought, flood, or other weather-related conditions, it is not feasible for you to reinvest the insurance money or other proceeds in property similar or related in service or use to the livestock, you can treat other property (excluding real property) used for farming purposes, as property similar or related in service or use to the livestock you disposed of. Buy turbotax 2011 Example. Buy turbotax 2011 Each year you normally sell 25 cows from your beef herd. Buy turbotax 2011 However, this year you had to sell 50 cows. Buy turbotax 2011 This is because a severe drought significantly reduced the amount of hay and pasture yield needed to feed your herd for the rest of the year. Buy turbotax 2011 Because, as a result of the severe drought, it is not feasible for you to use the proceeds from selling the extra cows to buy new cows, you can treat other property (excluding real property) used for farming purposes, as property similar or related in service or use to the cows you sold. Buy turbotax 2011 Standing crop destroyed by casualty. Buy turbotax 2011   If a storm or other casualty destroyed your standing crop and you use the insurance money to acquire either another standing crop or a harvested crop, this purchase qualifies as replacement property. Buy turbotax 2011 The costs of planting and raising a new crop qualify as replacement costs for the destroyed crop only if you use the crop method of accounting (discussed in chapter 2). Buy turbotax 2011 In that case, the costs of bringing the new crop to the same level of maturity as the destroyed crop qualify as replacement costs to the extent they are incurred during the replacement period. Buy turbotax 2011 Timber loss. Buy turbotax 2011   Standing timber you bought with the proceeds from the sale of timber downed as a result of a casualty, such as high winds, earthquakes, or volcanic eruptions, qualifies as replacement property. Buy turbotax 2011 If you bought the standing timber within the replacement period, you can postpone reporting the gain. Buy turbotax 2011 Business or income-producing property located in a federally declared disaster area. Buy turbotax 2011   If your destroyed business or income-producing property was located in a federally declared disaster area, any tangible replacement property you acquire for use in any business is treated as similar or related in service or use to the destroyed property. Buy turbotax 2011 For more information, see Disaster Area Losses in Publication 547. Buy turbotax 2011 Substituting replacement property. Buy turbotax 2011   Once you have acquired qualified replacement property that you designate as replacement property in a statement attached to your tax return, you cannot substitute other qualified replacement property. Buy turbotax 2011 This is true even if you acquire the other property within the replacement period. Buy turbotax 2011 However, if you discover that the original replacement property was not qualified replacement property, you can, within the replacement period, substitute the new qualified replacement property. Buy turbotax 2011 Basis of replacement property. Buy turbotax 2011   You must reduce the basis of your replacement property (its cost) by the amount of postponed gain. Buy turbotax 2011 In this way, tax on the gain is postponed until you dispose of the replacement property. Buy turbotax 2011 Replacement Period To postpone reporting your gain, you must buy replacement property within a specified period of time. Buy turbotax 2011 This is the replacement period. Buy turbotax 2011 The replacement period begins on the date your property was damaged, destroyed, stolen, sold, or exchanged. Buy turbotax 2011 The replacement period generally ends 2 years after the close of the first tax year in which you realize any part of your gain from the involuntary conversion. Buy turbotax 2011 Example. Buy turbotax 2011 You are a calendar year taxpayer. Buy turbotax 2011 While you were on vacation, farm equipment that cost $2,200 was stolen from your farm. Buy turbotax 2011 You discovered the theft when you returned to your farm on November 11, 2012. Buy turbotax 2011 Your insurance company investigated the theft and did not settle your claim until January 5, 2013, when they paid you $3,000. Buy turbotax 2011 You first realized a gain from the reimbursement for the theft during 2013, so you have until December 31, 2015, to replace the property. Buy turbotax 2011 Main home in disaster area. Buy turbotax 2011   For your main home (or its contents) located in a federally declared disaster area, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the involuntary conversion. Buy turbotax 2011 See Disaster Area Losses , later. Buy turbotax 2011 Property in the Midwestern disaster areas. Buy turbotax 2011   For property located in the Midwestern disaster areas (defined in Table 4 in the 2008 Publication 547) that was destroyed, damaged, stolen, or condemned, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Buy turbotax 2011 This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Midwestern disaster areas. Buy turbotax 2011 Property in the Kansas disaster area. Buy turbotax 2011   For property located in the Kansas disaster area that was destroyed, damaged, stolen, or condemned after May 3, 2007, as a result of the Kansas storms and tornadoes, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Buy turbotax 2011 This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Kansas disaster area. Buy turbotax 2011 Property in the Hurricane Katrina disaster area. Buy turbotax 2011   For property located in the Hurricane Katrina disaster area that was destroyed, damaged, stolen, or condemned after August 24, 2005, as a result of Hurricane Katrina, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Buy turbotax 2011 This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Buy turbotax 2011 Weather-related sales of livestock in an area eligible for federal assistance. Buy turbotax 2011   For the sale or exchange of livestock due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. Buy turbotax 2011 The IRS may extend the replacement period on a regional basis if the weather-related conditions continue for longer than 3 years. Buy turbotax 2011   For information on extensions of the replacement period because of persistent drought, see Notice 2006-82, 2006-39 I. Buy turbotax 2011 R. Buy turbotax 2011 B. Buy turbotax 2011 529, available at  www. Buy turbotax 2011 irs. Buy turbotax 2011 gov/irb/2006-39_IRB/ar11. Buy turbotax 2011 html. Buy turbotax 2011 For a list of counties for which exceptional, extreme, or severe drought was reported during the 12 months ending August 31, 2013, see Notice 2013-62, available at IRS. Buy turbotax 2011 gov. Buy turbotax 2011 Condemnation. Buy turbotax 2011   The replacement period for a condemnation begins on the earlier of the following dates. Buy turbotax 2011 The date on which you disposed of the condemned property. Buy turbotax 2011 The date on which the threat of condemnation began. Buy turbotax 2011 The replacement period generally ends 2 years after the close of the first tax year in which any part of the gain on the condemnation is realized. Buy turbotax 2011 But see Main home in disaster area , Property in the Midwestern disaster areas , Property in the Kansas disaster area , and Property in the Hurricane Katrina disaster area , earlier, for exceptions. Buy turbotax 2011 Business or investment real property. Buy turbotax 2011   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the close of the first tax year in which any part of the gain on the condemnation is realized. Buy turbotax 2011 Extension. Buy turbotax 2011   You can apply for an extension of the replacement period. Buy turbotax 2011 Send your written application to the Internal Revenue Service Center where you file your tax return. Buy turbotax 2011 See your tax return instructions for the address. Buy turbotax 2011 Include all the details about your need for an extension. Buy turbotax 2011 Make your application before the end of the replacement period. Buy turbotax 2011 However, you can file an application within a reasonable time after the replacement period ends if you can show a good reason for the delay. Buy turbotax 2011 You will get an extension of the replacement period if you can show reasonable cause for not making the replacement within the regular period. Buy turbotax 2011 How To Postpone Gain You postpone reporting your gain by reporting your choice on your tax return for the year you have the gain. Buy turbotax 2011 You have the gain in the year you receive insurance proceeds or other reimbursements that result in a gain. Buy turbotax 2011 Required statement. Buy turbotax 2011   You should attach a statement to your return for the year you have the gain. Buy turbotax 2011 This statement should include all the following information. Buy turbotax 2011 The date and details of the casualty, theft, or other involuntary conversion. Buy turbotax 2011 The insurance or other reimbursement you received. Buy turbotax 2011 How you figured the gain. Buy turbotax 2011 Replacement property acquired before return filed. Buy turbotax 2011   If you acquire replacement property before you file your return for the year you have the gain, your statement should also include detailed information about all the following items. Buy turbotax 2011 The replacement property. Buy turbotax 2011 The postponed gain. Buy turbotax 2011 The basis adjustment that reflects the postponed gain. Buy turbotax 2011 Any gain you are reporting as income. Buy turbotax 2011 Replacement property acquired after return filed. Buy turbotax 2011   If you intend to buy replacement property after you file your return for the year you realize gain, your statement should also say that you are choosing to replace the property within the required replacement period. Buy turbotax 2011   You should then attach another statement to your return for the year in which you buy the replacement property. Buy turbotax 2011 This statement should contain detailed information on the replacement property. Buy turbotax 2011 If you acquire part of your replacement property in one year and part in another year, you must attach a statement to each year's return. Buy turbotax 2011 Include in the statement detailed information on the replacement property bought in that year. Buy turbotax 2011 Reporting weather-related sales of livestock. Buy turbotax 2011   If you choose to postpone reporting the gain on weather-related sales or exchanges of livestock, show all the following information on a statement attached to your return for the tax year in which you first realize any of the gain. Buy turbotax 2011 Evidence of the weather-related conditions that forced the sale or exchange of the livestock. Buy turbotax 2011 The gain realized on the sale or exchange. Buy turbotax 2011 The number and kind of livestock sold or exchanged. Buy turbotax 2011 The number of livestock of each kind you would have sold or exchanged under your usual business practice. Buy turbotax 2011   Show all the following information and the preceding information on the return for the year in which you replace the livestock. Buy turbotax 2011 The dates you bought the replacement property. Buy turbotax 2011 The cost of the replacement property. Buy turbotax 2011 Description of the replacement property (for example, the number and kind of the replacement livestock). Buy turbotax 2011 Amended return. Buy turbotax 2011   You must file an amended return (Form 1040X) for the tax year of the gain in either of the following situations. Buy turbotax 2011 You do not acquire replacement property within the replacement period, plus extensions. Buy turbotax 2011 On this amended return, you must report the gain and pay any additional tax due. Buy turbotax 2011 You acquire replacement property within the required replacement period, plus extensions, but at a cost less than the amount you receive from the casualty, theft, or other involuntary conversion. Buy turbotax 2011 On this amended return, you must report the part of the gain that cannot be postponed and pay any additional tax due. Buy turbotax 2011 Disaster Area Losses Special rules apply to federally declared disaster area losses. Buy turbotax 2011 A federally declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Robert T. Buy turbotax 2011 Stafford Disaster Relief and Emergency Assistance Act. Buy turbotax 2011 It includes a major disaster or emergency declaration under the act. Buy turbotax 2011 A list of the areas warranting public or individual assistance (or both) under the Act is available at the Federal Emergency Management Agency (FEMA) web site at www. Buy turbotax 2011 fema. Buy turbotax 2011 gov. Buy turbotax 2011 This part discusses the special rules for when to deduct a disaster area loss and what tax deadlines may be postponed. Buy turbotax 2011 For other special rules, see Disaster Area Losses in Publication 547. Buy turbotax 2011 When to deduct the loss. Buy turbotax 2011   You generally must deduct a casualty loss in the year it occurred. Buy turbotax 2011 However, if you have a deductible loss from a disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct that loss on your return or amended return for the tax year immediately preceding the tax year in which the disaster happened. Buy turbotax 2011 If you make this choice, the loss is treated as having occurred in the preceding year. Buy turbotax 2011    Claiming a qualifying disaster loss on the previous year's return may result in a lower tax for that year, often producing or increasing a cash refund. Buy turbotax 2011   You must make the choice to take your casualty loss for the disaster in the preceding year by the later of the following dates. Buy turbotax 2011 The due date (without extensions) for filing your tax return for the tax year in which the disaster actually occurred. Buy turbotax 2011 The due date (with extensions) for the return for the preceding tax year. Buy turbotax 2011 Federal disaster relief grants. Buy turbotax 2011   Do not include post-disaster relief grants received under the Robert T. Buy turbotax 2011 Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, or funeral expenses. Buy turbotax 2011 Do not deduct casualty losses or medical expenses to the extent they are specifically reimbursed by these disaster relief grants. Buy turbotax 2011 If the casualty loss was specifically reimbursed by the grant and you received the grant after the year in which you deducted the casualty loss, see Reimbursement received after deducting loss , earlier. Buy turbotax 2011 Unemployment assistance payments under the Act are taxable unemployment compensation. Buy turbotax 2011 Qualified disaster relief payments. Buy turbotax 2011   Qualified disaster relief payments are not included in the income of individuals to the extent any expenses compensated by these payments are not otherwise compensated for by insurance or other reimbursement. Buy turbotax 2011 These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Buy turbotax 2011 No withholding applies to these payments. Buy turbotax 2011   Qualified disaster relief payments include payments you receive (regardless of the source) for the following expenses. Buy turbotax 2011 Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a federally declared disaster. Buy turbotax 2011 Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a federally declared disaster. Buy turbotax 2011 (A personal residence can be a rented residence or one you own. Buy turbotax 2011 ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a federally declared disaster. Buy turbotax 2011   Qualified disaster relief payments include amounts paid by a federal, state, or local government in connection with a federally declared disaster to individuals affected by the disaster. Buy turbotax 2011    Qualified disaster relief payments do not include: Payments for expenses otherwise paid for by insurance or other reimbursements, or Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation. Buy turbotax 2011 Qualified disaster mitigation payments. Buy turbotax 2011   Qualified disaster mitigation payments made under the Robert T. Buy turbotax 2011 Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not included in income. Buy turbotax 2011 These are payments you, as a property owner, receive to reduce the risk of future damage to your property. Buy turbotax 2011 You cannot increase your basis in property, or take a deduction or credit, for expenditures made with respect to those payments. Buy turbotax 2011 Sale of property under hazard mitigation program. Buy turbotax 2011   Generally, if you sell or otherwise transfer property, you must recognize any gain or loss for tax purposes unless the property is your main home. Buy turbotax 2011 You report the gain or deduct the loss on your tax return for the year you realize it. Buy turbotax 2011 (You cannot deduct a loss on personal-use property unless the loss resulted from a casualty, as discussed earlier. Buy turbotax 2011 ) However, if you sell or otherwise transfer property to the Federal Government, a state or local government, or an Indian tribal government under a hazard mitigation program, you can choose to postpone reporting the gain if you buy qualifying replacement property within a certain period of time. Buy turbotax 2011 See Postponing Gain , earlier, for the rules that apply. Buy turbotax 2011 Other federal assistance programs. Buy turbotax 2011    For more information about other federal assistance programs, see Crop Insurance and Crop Disaster Payments and Feed Assistance and Payments in chapter 3 earlier. Buy turbotax 2011 Postponed tax deadlines. Buy turbotax 2011   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. Buy turbotax 2011 The tax deadlines the IRS may postpone include those for filing income, excise, and employment tax returns, paying income, excise, and employment taxes, and making contributions to a traditional IRA or Roth IRA. Buy turbotax 2011   If any tax deadline is postponed, the IRS will publicize the postponement in your area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Buy turbotax 2011 Go to http://www. Buy turbotax 2011 irs. Buy turbotax 2011 gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. Buy turbotax 2011 Who is eligible. Buy turbotax 2011   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Buy turbotax 2011 Any individual whose main home is located in a covered disaster area (defined next). Buy turbotax 2011 Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. Buy turbotax 2011 Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered disaster area. Buy turbotax 2011 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. Buy turbotax 2011 The main home or principal place of business does not have to be located in the covered disaster area. Buy turbotax 2011 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. Buy turbotax 2011 The spouse on a joint return with a taxpayer who is eligible for postponements. Buy turbotax 2011 Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose necessary records to meet a postponed tax deadline are located in the covered disaster area. Buy turbotax 2011 Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. Buy turbotax 2011 Any other person determined by the IRS to be affected by a federally declared disaster. Buy turbotax 2011 Covered disaster area. Buy turbotax 2011   This is an area of a federally declared disaster area in which the IRS has decided to postpone tax deadlines for up to 1 year. Buy turbotax 2011 Abatement of interest and penalties. Buy turbotax 2011   The IRS may abate the interest and penalties on the underpaid income tax for the length of any postponement of tax deadlines. Buy turbotax 2011 Reporting Gains and Losses You will have to file one or more of the following forms to report your gains or losses from involuntary conversions. Buy turbotax 2011 Form 4684. Buy turbotax 2011   Use this form to report your gains and losses from casualties and thefts. Buy turbotax 2011 Form 4797. Buy turbotax 2011   Use this form to report involuntary conversions (other than from casualty or theft) of property used in your trade or business and capital assets held in connection with a trade or business or a transaction entered into for profit. Buy turbotax 2011 Also use this form if you have a gain from a casualty or theft on trade, business or income-producing property held for more than 1 year and you have to recapture some or all of your gain as ordinary income. Buy turbotax 2011 Form 8949. Buy turbotax 2011   Use this form to report gain from an involuntary conversion (other than from casualty or theft) of personal-use property. Buy turbotax 2011 Schedule A (Form 1040). Buy turbotax 2011   Use this form to deduct your losses from casualties and thefts of personal-use property and income-producing property, that you reported on Form 4684. Buy turbotax 2011 Schedule D (Form 1040). Buy turbotax 2011   Use this form to carry over the following gains. Buy turbotax 2011 Net gain shown on Form 4797 from an involuntary conversion of business property held for more than 1 year. Buy turbotax 2011 Net gain shown on Form 4684 from the casualty or theft of personal-use property. Buy turbotax 2011    Also use this form to figure the overall gain or loss from transactions reported on Form 8949. Buy turbotax 2011 Schedule F (Form 1040). Buy turbotax 2011   Use this form to deduct your losses from casualty or theft of livestock or produce bought for sale under Other expenses in Part II, line 32, if you use the cash method of accounting and have not otherwise deducted these losses. Buy turbotax 2011 Prev  Up  Next   Home   More Online Publications
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Individual Filer Notices

One of the ways we classify our notices is by the type of tax form they're about. We call notices we send about Form 1040, 1040A, 1040EZ, or any related schedules, forms, or other attachments individual filer notices. Notices we send about business-related tax forms such as Forms 941, 1065, and 1120, are called business filer notices and are listed elsewhere. If the individual filer notice you have isn't listed below, check back often. We'll be adding more on a regular basis.

The Notices in Numerical Order

Here's a list of notices with detailed information available.


CP 57 - Notice of Insufficient Funds
Informs the recipient that we are charging a penalty for insufficient funds.
CP 79 - Earned Income Credit Eligibility Requirement
Informs the recipient that they may need to complete an additional form to claim the credit if their Earned Income Credit (EIC) was disallowed or reduced by the IRS for any year after 1996.
CP 79A - Earned Income Credit Two Year Ban
Informs the recipient that they are banned from claiming the Earned Income Credit (EIC) for two years, and must complete an additional form to claim the EIC in the first year after the ban has been lifted.
CP 90 - Final Notice, Notice of Intent to Levy and Notice of Your Right to a Hearing FPLP
Final Notice: Notice of Intent to Levy and Notice of Your Right to a Hearing is systemically generated from Master File. These notices are sent certified mail, return receipt requested, and include Form 12153 and Pubs 594/1660.
CP 91 - Final Notice Before Levy on Social Security Benefits
Informs the recipient that they still have a balance due on their account and that we intend to levy on their Social Security benefits unless they take appropriate action within 30 days.
Page Last Reviewed or Updated: 25-Feb-2014

The Buy Turbotax 2011

Buy turbotax 2011 11. Buy turbotax 2011   Your Rights as a Taxpayer Table of Contents Declaration of Taxpayer Rights Examinations, Appeals, Collections, and RefundsBy mail. Buy turbotax 2011 By interview. Buy turbotax 2011 Repeat examinations. Buy turbotax 2011 The first part of this chapter explains some of your most important rights as a taxpayer. Buy turbotax 2011 The second part explains the examination, appeal, collection, and refund processes. Buy turbotax 2011 Declaration of Taxpayer Rights Protection of your rights. Buy turbotax 2011   IRS employees will explain and protect your rights as a taxpayer throughout your contact with us. Buy turbotax 2011 Privacy and confidentiality. Buy turbotax 2011   The IRS will not disclose to anyone the information you give us, except as authorized by law. Buy turbotax 2011 You have the right to know why we are asking you for information, how we will use it, and what happens if you do not provide requested information. Buy turbotax 2011 Professional and courteous service. Buy turbotax 2011   If you believe that an IRS employee has not treated you in a professional, fair, and courteous manner, you should tell that employee's supervisor. Buy turbotax 2011 If the supervisor's response is not satisfactory, you should write to the IRS director for your area or the center where you file your return. Buy turbotax 2011 Representation. Buy turbotax 2011   You can either represent yourself or, with proper written authorization, have someone else represent you in your place. Buy turbotax 2011 Your representative must be a person allowed to practice before the IRS, such as an attorney, certified public accountant, or enrolled agent. Buy turbotax 2011 If you are in an interview and ask to consult such a person, then we must stop and reschedule the interview in most cases. Buy turbotax 2011   You can have someone accompany you at an interview. Buy turbotax 2011 You can make sound recordings of any meetings with our examination, appeal, or collection personnel, provided you tell us in writing 10 days before the meeting. Buy turbotax 2011 Payment of only the correct amount of tax. Buy turbotax 2011   You are responsible for paying only the correct amount of tax due under the law—no more, no less. Buy turbotax 2011 If you cannot pay all of your tax when it is due, you may be able to make monthly installment payments. Buy turbotax 2011 Help with unresolved tax problems. Buy turbotax 2011   The Taxpayer Advocate Service can help you if you have tried unsuccessfully to resolve a problem with the IRS. Buy turbotax 2011 Your local Taxpayer Advocate can offer you special help if you have a significant hardship as a result of a tax problem. Buy turbotax 2011 For more information, call toll free 1-877-777-4778 (1-800-829-4059 for TTY/TDD) or write to the Taxpayer Advocate at the IRS office that last contacted you. Buy turbotax 2011 Appeals and judicial review. Buy turbotax 2011   If you disagree with us about the amount of your tax liability or certain collection actions, you have the right to ask the Appeals Office to review your case. Buy turbotax 2011 You can also ask a court to review your case. Buy turbotax 2011 Relief from certain penalties and interest. Buy turbotax 2011   The IRS will waive penalties when allowed by law if you can show you acted reasonably and in good faith or relied on the incorrect advice of an IRS employee. Buy turbotax 2011 We will waive interest that is the result of certain errors or delays caused by an IRS employee. Buy turbotax 2011 Examinations, Appeals, Collections, and Refunds Examinations (audits). Buy turbotax 2011   We accept most taxpayers' returns as filed. Buy turbotax 2011 If we inquire about your return or select it for examination, it does not suggest that you are dishonest. Buy turbotax 2011 The inquiry or examination may or may not result in more tax. Buy turbotax 2011 We may close your case without change; or, you may receive a refund. Buy turbotax 2011   The process of selecting a return for examination usually begins in one of two ways. Buy turbotax 2011 First, we use computer programs to identify returns that may have incorrect amounts. Buy turbotax 2011 These programs may be based on information returns, such as Forms 1099 and W-2, on studies of past examinations, or on certain issues identified by compliance projects. Buy turbotax 2011 Second, we use information from outside sources that indicates that a return may have incorrect amounts. Buy turbotax 2011 These sources may include newspapers, public records, and individuals. Buy turbotax 2011 If we determine that the information is accurate and reliable, we may use it to select a return for examination. Buy turbotax 2011   Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund, explains the rules and procedures that we follow in examinations. Buy turbotax 2011 The following sections give an overview of how we conduct examinations. Buy turbotax 2011 By mail. Buy turbotax 2011   We handle many examinations and inquiries by mail. Buy turbotax 2011 We will send you a letter with either a request for more information or a reason why we believe a change to your return may be needed. Buy turbotax 2011 You can respond by mail or you can request a personal interview with an examiner. Buy turbotax 2011 If you mail us the requested information or provide an explanation, we may or may not agree with you, and we will explain the reasons for any changes. Buy turbotax 2011 Please do not hesitate to write to us about anything you do not understand. Buy turbotax 2011 By interview. Buy turbotax 2011   If we notify you that we will conduct your examination through a personal interview, or you request such an interview, you have the right to ask that the examination take place at a reasonable time and place that is convenient for both you and the IRS. Buy turbotax 2011 If our examiner proposes any changes to your return, he or she will explain the reasons for the changes. Buy turbotax 2011 If you do not agree with these changes, you can meet with the examiner's supervisor. Buy turbotax 2011 Repeat examinations. Buy turbotax 2011   If we examined your return for the same items in either of the 2 previous years and proposed no change to your tax liability, please contact us as soon as possible so we can see if we should discontinue the examination. Buy turbotax 2011 Appeals. Buy turbotax 2011   If you do not agree with the examiner's proposed changes, you can appeal them to the Appeals Office of the IRS. Buy turbotax 2011 Most differences can be settled without expensive and time-consuming court trials. Buy turbotax 2011 Your appeal rights are explained in detail in both Publication 5, Your Appeal Rights and How To Prepare a Protest If You Don't Agree, and Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund. Buy turbotax 2011   If you do not wish to use the Appeals Office or disagree with its findings, you may be able to take your case to the U. Buy turbotax 2011 S. Buy turbotax 2011 Tax Court, U. Buy turbotax 2011 S. Buy turbotax 2011 Court of Federal Claims, or the U. Buy turbotax 2011 S. Buy turbotax 2011 District Court where you live. Buy turbotax 2011 If you take your case to court, the IRS will have the burden of proving certain facts if you kept adequate records to show your tax liability, cooperated with the IRS, and meet certain other conditions. Buy turbotax 2011 If the court agrees with you on most issues in your case and finds that our position was largely unjustified, you may be able to recover some of your administrative and litigation costs. Buy turbotax 2011 You will not be eligible to recover these costs unless you tried to resolve your case administratively, including going through the appeals system, and you gave us the information necessary to resolve the case. Buy turbotax 2011 Collections. Buy turbotax 2011   Publication 594, The IRS Collection Process, explains your rights and responsibilities regarding payment of federal taxes. Buy turbotax 2011 It describes: What to do when you owe taxes. Buy turbotax 2011 It describes what to do if you get a tax bill and what to do if you think your bill is wrong. Buy turbotax 2011 It also covers making installment payments, delaying collection action, and submitting an offer in compromise. Buy turbotax 2011 IRS collection actions. Buy turbotax 2011 It covers liens, releasing a lien, levies, releasing a levy, seizures and sales, and release of property. Buy turbotax 2011   Your collection appeal rights are explained in detail in Publication 1660, Collection Appeal Rights. Buy turbotax 2011 Innocent spouse relief. Buy turbotax 2011   Generally, both you and your spouse are responsible, jointly and individually, for paying the full amount of any tax, interest, or penalties due on your joint return. Buy turbotax 2011 To seek relief from any liability related to your spouse (or former spouse), you must file a claim on Form 8857, Request for Innocent Spouse Relief. Buy turbotax 2011 In some cases, Form 8857 may need to be filed within 2 years of the date on which the IRS first attempted to collect the tax from you. Buy turbotax 2011 Do not file Form 8857 with your Form 1040. Buy turbotax 2011 For more information, see Publication 971, Innocent Spouse Relief, and Form 8857 or you can call the Innocent Spouse office toll-free at 1-855-851-2009. Buy turbotax 2011 Refunds. Buy turbotax 2011   You can file a claim for refund if you think you paid too much tax. Buy turbotax 2011 You must generally file the claim within 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. Buy turbotax 2011 The law generally provides for interest on your refund if it is not paid within 45 days of the date you filed your return or claim for refund. Buy turbotax 2011 Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund, has more information on refunds. Buy turbotax 2011   If you were due a refund but you did not file a return, you must file within 3 years from the date the return was due (including extensions) to get that refund. Buy turbotax 2011 Prev  Up  Next   Home   More Online Publications