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Fill out 1040x online Publication 600 - Additional Material Table of Contents Please click here for the text description of the image. Fill out 1040x online Electronic Filing (E-file) Please click here for the text description of the image. Fill out 1040x online Electronic Filing (e-file) This image is too large to be displayed in the current screen. Fill out 1040x online Please click the link to view the image. Fill out 1040x online Electronic Filing (e-file) Please click here for the text description of the image. Fill out 1040x online Electronic Filing (e-file) Prev  Up     Home   More Online Publications
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Fill out 1040x online Publication 547 - Main Content Table of Contents CasualtyFamily pet. Fill out 1040x online Progressive deterioration. Fill out 1040x online Special Procedure for Damage From Corrosive Drywall Theft Loss on Deposits Proof of Loss Figuring a LossGain from reimbursement. Fill out 1040x online Business or income-producing property. Fill out 1040x online Loss of inventory. Fill out 1040x online Leased property. Fill out 1040x online Exception for personal-use real property. Fill out 1040x online Decrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Deduction Limits2% Rule $100 Rule 10% Rule Figuring the Deduction Figuring a GainPostponement of Gain When To Report Gains and LossesLoss on deposits. Fill out 1040x online Lessee's loss. Fill out 1040x online Disaster Area LossesDisaster loss to inventory. Fill out 1040x online Main home in disaster area. Fill out 1040x online Unsafe home. Fill out 1040x online Time limit for making choice. Fill out 1040x online Revoking your choice. Fill out 1040x online Figuring the loss deduction. Fill out 1040x online How to report the loss on Form 1040X. Fill out 1040x online Records. Fill out 1040x online Need a copy of your tax return for the preceding year? Postponed Tax Deadlines Contacting the Federal Emergency Management Agency (FEMA) How To Report Gains and LossesProperty held 1 year or less. Fill out 1040x online Property held more than 1 year. Fill out 1040x online Depreciable property. Fill out 1040x online Adjustments to Basis If Deductions Are More Than Income How To Get Tax HelpLow Income Taxpayer Clinics Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Fill out 1040x online A sudden event is one that is swift, not gradual or progressive. Fill out 1040x online An unexpected event is one that is ordinarily unanticipated and unintended. Fill out 1040x online 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. Fill out 1040x online Generally, casualty losses are deductible during the taxable year that the loss occurred. Fill out 1040x online See Table 3, later. Fill out 1040x online Deductible losses. Fill out 1040x online   Deductible casualty losses can result from a number of different causes, including the following. Fill out 1040x online Car accidents (but see Nondeductible losses , next, for exceptions). Fill out 1040x online Earthquakes. Fill out 1040x online Fires (but see Nondeductible losses , next, for exceptions). Fill out 1040x online Floods. Fill out 1040x online Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses , later. Fill out 1040x online Mine cave-ins. Fill out 1040x online Shipwrecks. Fill out 1040x online Sonic booms. Fill out 1040x online Storms, including hurricanes and tornadoes. Fill out 1040x online Terrorist attacks. Fill out 1040x online Vandalism. Fill out 1040x online Volcanic eruptions. Fill out 1040x online Nondeductible losses. Fill out 1040x online   A casualty loss is not deductible if the damage or destruction is caused by the following. Fill out 1040x online Accidentally breaking articles such as glassware or china under normal conditions. Fill out 1040x online A family pet (explained below). Fill out 1040x online A fire if you willfully set it, or pay someone else to set it. Fill out 1040x online A car accident if your willful negligence or willful act caused it. Fill out 1040x online The same is true if the willful act or willful negligence of someone acting for you caused the accident. Fill out 1040x online Progressive deterioration (explained below). Fill out 1040x online However, see Special Procedure for Damage From Corrosive Drywall , later. Fill out 1040x online Family pet. Fill out 1040x online   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. Fill out 1040x online Example. Fill out 1040x online Your antique oriental rug was damaged by your new puppy before it was housebroken. Fill out 1040x online Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. Fill out 1040x online Progressive deterioration. Fill out 1040x online   Loss of property due to progressive deterioration is not deductible as a casualty loss. Fill out 1040x online This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Fill out 1040x online The following are examples of damage due to progressive deterioration. Fill out 1040x online The steady weakening of a building due to normal wind and weather conditions. Fill out 1040x online The deterioration and damage to a water heater that bursts. Fill out 1040x online However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. Fill out 1040x online Most losses of property caused by droughts. Fill out 1040x online To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. Fill out 1040x online Termite or moth damage. Fill out 1040x online The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. Fill out 1040x online However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. Fill out 1040x online Special Procedure for Damage From Corrosive Drywall Under a special procedure, you can deduct the amounts you paid to repair damage to your home and household appliances due to corrosive drywall. Fill out 1040x online Under this procedure, you treat the amounts paid for repairs as a casualty loss in the year of payment. Fill out 1040x online For example, amounts you paid for repairs in 2013 are deductible on your 2013 tax return and amounts you paid for repairs in 2012 are deductible on your 2012 tax return. Fill out 1040x online Note. Fill out 1040x online If you paid for any repairs before 2013 and you choose to follow this special procedure, you can amend your return for the earlier year by filing Form 1040X, Amended U. Fill out 1040x online S. Fill out 1040x online Individual Income Tax Return, and attaching a completed Form 4684 for the appropriate year. Fill out 1040x online Form 4684 for the appropriate year can be found at IRS. Fill out 1040x online gov. Fill out 1040x online Generally, Form 1040X must be filed within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later. Fill out 1040x online Corrosive drywall. Fill out 1040x online   For purposes of this special procedure, “corrosive drywall” means drywall that is identified as problem drywall under the two-step identification method published by the Consumer Product Safety Commission (CPSC) and the Department of Housing and Urban Development (HUD) in their interim guidance dated January 28, 2010, as revised by the CPSC and HUD. Fill out 1040x online The revised identification guidance and remediation guidelines are available at www. Fill out 1040x online cpsc. Fill out 1040x online gov/Safety-Education/Safety-Education-Centers/Drywall. Fill out 1040x online Special instructions for completing Form 4684. Fill out 1040x online   If you choose to follow this special procedure, complete Form 4684, Section A, according to the instructions below. Fill out 1040x online The IRS will not challenge your treatment of damage resulting from corrosive drywall as a casualty loss if you determine and report the loss as explained below. Fill out 1040x online Top margin of Form 4684. Fill out 1040x online   Enter “Revenue Procedure 2010-36”. Fill out 1040x online Line 1. Fill out 1040x online   Enter the information required by the line 1 instructions. Fill out 1040x online Line 2. Fill out 1040x online   Skip this line. Fill out 1040x online Line 3. Fill out 1040x online   Enter the amount of insurance or other reimbursements you received (including through litigation). Fill out 1040x online If none, enter -0-. Fill out 1040x online Lines 4–7. Fill out 1040x online   Skip these lines. Fill out 1040x online Line 8. Fill out 1040x online   Enter the amount you paid to repair the damage to your home and household appliances due to corrosive drywall. Fill out 1040x online Enter only the amounts you paid to restore your home to the condition existing immediately before the damage. Fill out 1040x online Do not enter any amounts you paid for improvements or additions that increased the value of your home above its pre-loss value. Fill out 1040x online If you replaced a household appliance instead of repairing it, enter the lesser of: The current cost to replace the original appliance, or The basis of the original appliance (generally its cost). Fill out 1040x online Line 9. Fill out 1040x online   If line 8 is more than line 3, do one of the following. Fill out 1040x online If you have a pending claim for reimbursement (or you intend to pursue reimbursement), enter 75% of the difference between lines 3 and 8. Fill out 1040x online If item (1) does not apply to you, enter the full amount of the difference between lines 3 and 8. Fill out 1040x online If line 8 is less than or equal to line 3, you cannot claim a casualty loss deduction using this special procedure. Fill out 1040x online    If you have a pending claim for reimbursement (or you intend to pursue reimbursement), you may have income or an additional deduction in a later tax year depending on the actual amount of reimbursement received. Fill out 1040x online See Reimbursement Received After Deducting Loss, later. Fill out 1040x online Lines 10–18. Fill out 1040x online   Complete these lines according to the Instructions for Form 4684. Fill out 1040x online Choosing not to follow this special procedure. Fill out 1040x online   If you choose not to follow this special procedure, you are subject to all of the provisions that apply to the deductibility of casualty losses, and you must complete lines 1–9 according to the Instructions for Form 4684. Fill out 1040x online This means, for example, that you must establish that the damage, destruction, or loss of property resulted from an identifiable event as defined earlier under Casualty . Fill out 1040x online Furthermore, you must have proof that shows the following. Fill out 1040x online The loss is properly deductible in the tax year you claimed it and not in some other year. Fill out 1040x online See When To Report Gains and Losses , later. Fill out 1040x online The amount of the claimed loss. Fill out 1040x online See Proof of Loss , later. Fill out 1040x online No claim for reimbursement of any portion of the loss exists for which there is a reasonable prospect of recovery. Fill out 1040x online See When To Report Gains and Losses , later. Fill out 1040x online Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. Fill out 1040x online 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. Fill out 1040x online You do not need to show a conviction for theft. Fill out 1040x online Theft includes the taking of money or property by the following means. Fill out 1040x online Blackmail. Fill out 1040x online Burglary. Fill out 1040x online Embezzlement. Fill out 1040x online Extortion. Fill out 1040x online Kidnapping for ransom. Fill out 1040x online Larceny. Fill out 1040x online Robbery. Fill out 1040x online The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Fill out 1040x online Decline in market value of stock. Fill out 1040x online   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. Fill out 1040x online 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. Fill out 1040x online You report a capital loss on Schedule D (Form 1040). Fill out 1040x online For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Fill out 1040x online Mislaid or lost property. Fill out 1040x online    The simple disappearance of money or property is not a theft. Fill out 1040x online 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. Fill out 1040x online Sudden, unexpected, and unusual events were defined earlier under Casualty . Fill out 1040x online Example. Fill out 1040x online A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Fill out 1040x online The diamond falls from the ring and is never found. Fill out 1040x online The loss of the diamond is a casualty. Fill out 1040x online Losses from Ponzi-type investment schemes. Fill out 1040x online   The IRS has issued the following guidance to assist taxpayers who are victims of losses from Ponzi-type investment schemes: Revenue Ruling 2009-9, 2009-14 I. Fill out 1040x online R. Fill out 1040x online B. Fill out 1040x online 735 (available at www. Fill out 1040x online irs. Fill out 1040x online gov/irb/2009-14_IRB/ar07. Fill out 1040x online html). Fill out 1040x online Revenue Procedure 2009-20, 2009-14 I. Fill out 1040x online R. Fill out 1040x online B. Fill out 1040x online 749 (available at www. Fill out 1040x online irs. Fill out 1040x online gov/irb/2009-14_IRB/ar11. Fill out 1040x online html). Fill out 1040x online Revenue Procedure 2011-58, 2011-50 I. Fill out 1040x online R. Fill out 1040x online B. Fill out 1040x online 847 (available at www. Fill out 1040x online irs. Fill out 1040x online gov/irb/2011-50_IRB/ar11. Fill out 1040x online html). Fill out 1040x online 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. Fill out 1040x online Skip lines 19 to 27, but you must fill out Section B, lines 29 to 39, as appropriate. Fill out 1040x online Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Fill out 1040x online You do not need to complete Appendix A. Fill out 1040x online For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. Fill out 1040x online   If you choose not to use the procedures in Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. Fill out 1040x online Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Fill out 1040x online If you incurred this type of loss, you can choose one of the following ways to deduct the loss. Fill out 1040x online As a casualty loss. Fill out 1040x online As an ordinary loss. Fill out 1040x online As a nonbusiness bad debt. Fill out 1040x online Casualty loss or ordinary loss. Fill out 1040x online   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. Fill out 1040x online The choice generally is 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. Fill out 1040x online 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. Fill out 1040x online 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. Fill out 1040x online Once you make the choice, you cannot change it without permission from the Internal Revenue Service. Fill out 1040x online   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Fill out 1040x online The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. Fill out 1040x online Your loss is subject to the 2%-of-adjusted-gross-income limit. Fill out 1040x online You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. Fill out 1040x online Nonbusiness bad debt. Fill out 1040x online   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. Fill out 1040x online How to report. Fill out 1040x online   The kind of deduction you choose for your loss on deposits determines how you report your loss. Fill out 1040x online See Table 1. Fill out 1040x online More information. Fill out 1040x online   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684. Fill out 1040x online Deducted loss recovered. Fill out 1040x online   If you recover an amount you deducted as a loss in an earlier year, you may have to include the amount recovered in your income for the year of recovery. Fill out 1040x online If any part of the original deduction did not reduce your tax in the earlier year, you do not have to include that part of the recovery in your income. Fill out 1040x online For more information, see Recoveries in Publication 525. Fill out 1040x online Proof of Loss To deduct a casualty or theft loss, you must be able to show that there was a casualty or theft. Fill out 1040x online You also must be able to support the amount you take as a deduction. Fill out 1040x online Casualty loss proof. Fill out 1040x online   For a casualty loss, you should be able to show all of the following. Fill out 1040x online The type of casualty (car accident, fire, storm, etc. Fill out 1040x online ) and when it occurred. Fill out 1040x online That the loss was a direct result of the casualty. Fill out 1040x online 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. Fill out 1040x online Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Fill out 1040x online Theft loss proof. Fill out 1040x online   For a theft loss, you should be able to show all of the following. Fill out 1040x online When you discovered that your property was missing. Fill out 1040x online That your property was stolen. Fill out 1040x online That you were the owner of the property. Fill out 1040x online Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Fill out 1040x online    It is important that you have records that will prove your deduction. Fill out 1040x online If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. Fill out 1040x online Figuring a Loss To determine your deduction for a casualty or theft loss, you must first figure your loss. Fill out 1040x online Table 1. Fill out 1040x online Reporting Loss on Deposits IF you choose to report the loss as a(n). Fill out 1040x online . Fill out 1040x online . Fill out 1040x online   THEN report it on. Fill out 1040x online . Fill out 1040x online . Fill out 1040x online casualty loss   Form 4684 and Schedule A  (Form 1040). Fill out 1040x online ordinary loss   Schedule A (Form 1040). Fill out 1040x online nonbusiness bad debt   Form 8949 and Schedule D (Form 1040). Fill out 1040x online Amount of loss. Fill out 1040x online   Figure the amount of your loss using the following steps. Fill out 1040x online Determine your adjusted basis in the property before the casualty or theft. Fill out 1040x online Determine the decrease in fair market value (FMV) of the property as a result of the casualty or theft. Fill out 1040x online From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. Fill out 1040x online 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. Fill out 1040x online Gain from reimbursement. Fill out 1040x online   If your reimbursement is more than your adjusted basis in the property, you have a gain. Fill out 1040x online This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. Fill out 1040x online If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. Fill out 1040x online See Figuring a Gain , later. Fill out 1040x online Business or income-producing property. Fill out 1040x online   If you have business or income-producing property, such as rental property, and it is stolen or completely destroyed, the decrease in FMV is not considered. Fill out 1040x online 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   Loss of inventory. Fill out 1040x online   There are two ways you can deduct a casualty or theft loss of inventory, including items you hold for sale to customers. Fill out 1040x online   One way is to deduct the loss through the increase in the cost of goods sold by properly reporting your opening and closing inventories. Fill out 1040x online Do not claim this loss again as a casualty or theft loss. Fill out 1040x online If you take the loss through the increase in the cost of goods sold, include any insurance or other reimbursement you receive for the loss in gross income. Fill out 1040x online   The other way is to deduct the loss separately. Fill out 1040x online If you deduct it separately, eliminate the affected inventory items from the cost of goods sold by making a downward adjustment to opening inventory or purchases. Fill out 1040x online Reduce the loss by the reimbursement you received. Fill out 1040x online Do not include the reimbursement in gross income. Fill out 1040x online If you do not receive the reimbursement by the end of the year, you may not claim a loss to the extent you have a reasonable prospect of recovery. Fill out 1040x online Leased property. Fill out 1040x online   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. Fill out 1040x online Separate computations. Fill out 1040x online   Generally, if a single casualty or theft involves more than one item of property, you must figure the loss on each item separately. Fill out 1040x online Then combine the losses to determine the total loss from that casualty or theft. Fill out 1040x online Exception for personal-use real property. Fill out 1040x online   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. Fill out 1040x online Figure the loss using the smaller of the following. Fill out 1040x online The decrease in FMV of the entire property. Fill out 1040x online The adjusted basis of the entire property. Fill out 1040x online   See Real property under Figuring the Deduction, later. Fill out 1040x online 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. Fill out 1040x online 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. Fill out 1040x online FMV of stolen property. Fill out 1040x online   The FMV of property immediately after a theft is considered to be zero because you no longer have the property. Fill out 1040x online Example. Fill out 1040x online Several years ago, you purchased silver dollars at face value for $150. Fill out 1040x online This is your adjusted basis in the property. Fill out 1040x online Your silver dollars were stolen this year. Fill out 1040x online The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. Fill out 1040x online Your theft loss is $150. Fill out 1040x online Recovered stolen property. Fill out 1040x online   Recovered stolen property is your property that was stolen and later returned to you. Fill out 1040x online 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. Fill out 1040x online Use this amount to refigure your total loss for the year in which the loss was deducted. Fill out 1040x online   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. Fill out 1040x online But report the difference only up to the amount of the loss that reduced your tax. Fill out 1040x online For more information on the amount to report, see Recoveries in Publication 525. Fill out 1040x online 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. Fill out 1040x online However, other measures also can be used to establish certain decreases. Fill out 1040x online See Appraisal and Cost of cleaning up or making repairs , next. Fill out 1040x online Appraisal. Fill out 1040x online   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterwards should be made by a competent appraiser. Fill out 1040x online The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Fill out 1040x online This information is needed to limit any deduction to the actual loss resulting from damage to the property. Fill out 1040x online   Several factors are important in evaluating the accuracy of an appraisal, including the following. Fill out 1040x online The appraiser's familiarity with your property before and after the casualty or theft. Fill out 1040x online The appraiser's knowledge of sales of comparable property in the area. Fill out 1040x online The appraiser's knowledge of conditions in the area of the casualty. Fill out 1040x online The appraiser's method of appraisal. Fill out 1040x online 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. Fill out 1040x online For more information on disasters, see Disaster Area Losses, later. Fill out 1040x online Cost of cleaning up or making repairs. Fill out 1040x online   The cost of repairing damaged property is not part of a casualty loss. Fill out 1040x online Neither is the cost of cleaning up after a casualty. Fill out 1040x online But you can use the cost of cleaning up or of making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. Fill out 1040x online The repairs are actually made. Fill out 1040x online The repairs are necessary to bring the property back to its condition before the casualty. Fill out 1040x online The amount spent for repairs is not excessive. Fill out 1040x online The repairs take care of the damage only. Fill out 1040x online The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Fill out 1040x online Landscaping. Fill out 1040x online   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. Fill out 1040x online You may be able to measure your loss by what you spend on the following. Fill out 1040x online Removing destroyed or damaged trees and shrubs, minus any salvage you receive. Fill out 1040x online Pruning and other measures taken to preserve damaged trees and shrubs. Fill out 1040x online Replanting necessary to restore the property to its approximate value before the casualty. Fill out 1040x online Car value. Fill out 1040x online   Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. Fill out 1040x online You can use the books' retail values and modify them by factors such as the mileage and condition of your car to figure its value. Fill out 1040x online 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. Fill out 1040x online If your car is not listed in the books, determine its value from other sources. Fill out 1040x online A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. Fill out 1040x online 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. Fill out 1040x online Cost of protection. Fill out 1040x online   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. Fill out 1040x online The amount you spend on insurance or to board up your house against a storm is not part of your loss. Fill out 1040x online If the property is business property, these expenses are deductible as business expenses. Fill out 1040x online   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. Fill out 1040x online An example would be the cost of a dike to prevent flooding. Fill out 1040x online Exception. Fill out 1040x online   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 (discussed later under Disaster Area Losses ). Fill out 1040x online Related expenses. Fill out 1040x online   The incidental expenses 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. Fill out 1040x online However, they may be deductible as business expenses if the damaged or stolen property is business property. Fill out 1040x online Replacement cost. Fill out 1040x online   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. Fill out 1040x online Example. Fill out 1040x online You bought a new chair 4 years ago for $300. Fill out 1040x online In April, a fire destroyed the chair. Fill out 1040x online You estimate that it would cost $500 to replace it. Fill out 1040x online If you had sold the chair before the fire, you estimate that you could have received only $100 for it because it was 4 years old. Fill out 1040x online The chair was not insured. Fill out 1040x online Your loss is $100, the FMV of the chair before the fire. Fill out 1040x online It is not $500, the replacement cost. Fill out 1040x online Sentimental value. Fill out 1040x online   Do not consider sentimental value when determining your loss. Fill out 1040x online 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. Fill out 1040x online Decline in market value of property in or near casualty area. Fill out 1040x online   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. Fill out 1040x online You have a loss only for actual casualty damage to your property. Fill out 1040x online However, if your home is in a federally declared disaster area, see Disaster Area Losses , later. Fill out 1040x online Costs of photographs and appraisals. Fill out 1040x online   Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. Fill out 1040x online Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. Fill out 1040x online   Appraisals are used to figure the decrease in FMV because of a casualty or theft. Fill out 1040x online See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. Fill out 1040x online   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. Fill out 1040x online They are expenses in determining your tax liability. Fill out 1040x online You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). Fill out 1040x online Adjusted Basis The measure of your investment in the property you own is its basis. Fill out 1040x online For property you buy, your basis is usually its cost to you. Fill out 1040x online For property you acquire in some other way, such as inheriting it, receiving it as a gift, or getting it in a nontaxable exchange, you must figure your basis in another way, as explained in Publication 551. Fill out 1040x online If you inherited the property from someone who died in 2010 and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Fill out 1040x online Adjustments to basis. Fill out 1040x online    While you own the property, various events may take place that change your basis. Fill out 1040x online Some events, such as additions or permanent improvements to the property, increase basis. Fill out 1040x online Others, such as earlier casualty losses and depreciation deductions, decrease basis. Fill out 1040x online When you add the increases to the basis and subtract the decreases from the basis, the result is your adjusted basis. Fill out 1040x online See Publication 551 for more information on figuring the basis of your property. Fill out 1040x online Insurance and Other Reimbursements If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Fill out 1040x online You do not have a casualty or theft loss to the extent you are reimbursed. Fill out 1040x online If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Fill out 1040x online You must reduce your loss even if you do not receive payment until a later tax year. Fill out 1040x online See Reimbursement Received After Deducting Loss , later. Fill out 1040x online Failure to file a claim for reimbursement. Fill out 1040x online   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. Fill out 1040x online Otherwise, you cannot deduct this loss as a casualty or theft. Fill out 1040x online The portion of the loss usually not covered by insurance (for example, a deductible) is not subject to this rule. Fill out 1040x online Example. Fill out 1040x online You have a car insurance policy with a $1,000 deductible. Fill out 1040x online Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the $100 and 10% rules, discussed later). Fill out 1040x online This is true, even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. Fill out 1040x online Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. Fill out 1040x online Other types of reimbursements are discussed next. Fill out 1040x online Also see the Instructions for Form 4684. Fill out 1040x online Employer's emergency disaster fund. Fill out 1040x online   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. Fill out 1040x online Take into consideration only the amount you used to replace your destroyed or damaged property. Fill out 1040x online Example. Fill out 1040x online Your home was extensively damaged by a tornado. Fill out 1040x online Your loss after reimbursement from your insurance company was $10,000. Fill out 1040x online Your employer set up a disaster relief fund for its employees. Fill out 1040x online Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. Fill out 1040x online You received $4,000 from the fund and spent the entire amount on repairs to your home. Fill out 1040x online In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. Fill out 1040x online Your casualty loss before applying the deduction limits (discussed later) is $6,000. Fill out 1040x online Cash gifts. Fill out 1040x online   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. Fill out 1040x online This applies even if you use the money to pay for repairs to property damaged in the disaster. Fill out 1040x online Example. Fill out 1040x online Your home was damaged by a hurricane. Fill out 1040x online Relatives and neighbors made cash gifts to you that were excludable from your income. Fill out 1040x online You used part of the cash gifts to pay for repairs to your home. Fill out 1040x online There were no limits or restrictions on how you could use the cash gifts. Fill out 1040x online It was an excludable gift, so the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. Fill out 1040x online Insurance payments for living expenses. Fill out 1040x online   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. Fill out 1040x online You lose the use of your main home because of a casualty. Fill out 1040x online Government authorities do not allow you access to your main home because of a casualty or threat of one. Fill out 1040x online Inclusion in income. Fill out 1040x online   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. Fill out 1040x online Report this amount on Form 1040, line 21. Fill out 1040x online However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. Fill out 1040x online See Qualified disaster relief payments , later, under Disaster Area Losses. Fill out 1040x online   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. Fill out 1040x online Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. Fill out 1040x online Generally, these expenses include the amounts you pay for the following. Fill out 1040x online Renting suitable housing. Fill out 1040x online Transportation. Fill out 1040x online Food. Fill out 1040x online Utilities. Fill out 1040x online Miscellaneous services. Fill out 1040x online 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. Fill out 1040x online Example. Fill out 1040x online As a result of a fire, you vacated your apartment for a month and moved to a motel. Fill out 1040x online You normally pay $525 a month for rent. Fill out 1040x online None was charged for the month the apartment was vacated. Fill out 1040x online Your motel rent for this month was $1,200. Fill out 1040x online You normally pay $200 a month for food. Fill out 1040x online Your food expenses for the month you lived in the motel were $400. Fill out 1040x online You received $1,100 from your insurance company to cover your living expenses. Fill out 1040x online You determine the payment you must include in income as follows. Fill out 1040x online 1. Fill out 1040x online Insurance payment for living expenses $1,100 2. Fill out 1040x online Actual expenses during the month you are unable to use your home because of the fire $1,600   3. Fill out 1040x online Normal living expenses 725   4. Fill out 1040x online Temporary increase in living expenses: Subtract line 3  from line 2 875 5. Fill out 1040x online Amount of payment includible in income: Subtract line 4 from line 1 $ 225 Tax year of inclusion. Fill out 1040x online   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. Fill out 1040x online Example. Fill out 1040x online Your main home was destroyed by a tornado in August 2011. Fill out 1040x online You regained use of your home in November 2012. Fill out 1040x online The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. Fill out 1040x online You include this amount in income on your 2012 Form 1040. Fill out 1040x online 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. Fill out 1040x online Disaster relief. Fill out 1040x online   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. Fill out 1040x online Table 2. Fill out 1040x online Deduction Limit Rules for Personal-Use and Employee Property       $100 Rule 10% Rule 2% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. Fill out 1040x online Apply this rule to personal-use property after you have figured the amount of your loss. Fill out 1040x online You must reduce your total casualty or theft loss by 10% of your adjusted gross income. Fill out 1040x online Apply this rule to personal-use property after you reduce each loss by $100 (the $100 rule). Fill out 1040x online You must reduce your total casualty or theft loss by 2% of your adjusted gross income. Fill out 1040x online Apply this rule to property you used in performing services as an employee after you have figured the amount of your loss and added it to your job expenses and most other miscellaneous itemized deductions. Fill out 1040x online Single Event Apply this rule only once, even if many pieces of property are affected. Fill out 1040x online Apply this rule only once, even if many pieces of property are affected. Fill out 1040x online Apply this rule only once, even if many pieces of property are affected. Fill out 1040x online More Than One Event Apply to the loss from each event. Fill out 1040x online Apply to the total of all your losses from all events. Fill out 1040x online Apply to the total of all your losses from all events. Fill out 1040x online More Than One Person— With Loss From the   Same Event  (other than a married couple  filing jointly) Apply separately to each person. Fill out 1040x online Apply separately to each person. Fill out 1040x online Apply separately to each person. Fill out 1040x online Married Couple—  With Loss From the  Same Event Filing Joint Return Apply as if you were one person. Fill out 1040x online Apply as if you were one person. Fill out 1040x online Apply as if you were one person. Fill out 1040x online Filing Separate Return Apply separately to each spouse. Fill out 1040x online Apply separately to each spouse. Fill out 1040x online Apply separately to each spouse. Fill out 1040x online More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. Fill out 1040x online Apply separately to each owner of jointly owned property. Fill out 1040x online Apply separately to each owner of jointly owned property. Fill out 1040x online    Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster, are not taxable income to you. Fill out 1040x online For more information, see Qualified disaster relief payments under Disaster Area Losses, later. Fill out 1040x online   Disaster unemployment assistance payments are unemployment benefits that are taxable. Fill out 1040x online   Generally, disaster relief grants received under the Robert T. Fill out 1040x online Stafford Disaster Relief and Emergency Assistance Act are not included in your income. Fill out 1040x online See Federal disaster relief grants , later, under Disaster Area Losses. Fill out 1040x online Loan proceeds. Fill out 1040x online   Do not reduce your casualty loss by loan proceeds you use to rehabilitate or replace property on which you are claiming a casualty loss deduction. Fill out 1040x online If you have a federal loan that is canceled (forgiven), see Federal loan canceled , later, under Disaster Area Losses. Fill out 1040x online Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using the amount of your expected reimbursement, you may have to adjust your tax return for the tax year in which you get your actual reimbursement. Fill out 1040x online This section explains the adjustment you may have to make. Fill out 1040x online Actual reimbursement less than expected. Fill out 1040x online   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. Fill out 1040x online Example. Fill out 1040x online Your personal car had a FMV of $2,000 when it was destroyed in a collision with another car in 2012. Fill out 1040x online The accident was due to the negligence of the other driver. Fill out 1040x online At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. Fill out 1040x online You did not have a deductible loss in 2012. Fill out 1040x online In January 2013, the court awards you a judgment of $2,000. Fill out 1040x online However, in July it becomes apparent that you will be unable to collect any amount from the other driver. Fill out 1040x online Since this is your only casualty or theft loss, you can deduct the loss in 2013 that is figured by applying the Deduction Limits (discussed later). Fill out 1040x online Actual reimbursement more than expected. Fill out 1040x online   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. Fill out 1040x online 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. Fill out 1040x online You do not refigure your tax for the year you claimed the deduction. Fill out 1040x online See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. Fill out 1040x online Example. Fill out 1040x online In 2012, a hurricane destroyed your motorboat. Fill out 1040x online Your loss was $3,000, and you estimated that your insurance would cover $2,500 of it. Fill out 1040x online You did not itemize deductions on your 2012 return, so you could not deduct the loss. Fill out 1040x online When the insurance company reimburses you for the loss, you do not report any of the reimbursement as income. Fill out 1040x online This is true even if it is for the full $3,000 because you did not deduct the loss on your 2012 return. Fill out 1040x online The loss did not reduce your tax. Fill out 1040x online    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. Fill out 1040x online 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. Fill out 1040x online Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. Fill out 1040x online You may be able to postpone reporting any remaining gain as explained under Postponement of Gain, later. Fill out 1040x online Actual reimbursement same as expected. Fill out 1040x online   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. Fill out 1040x online Example. Fill out 1040x online In December 2013, you had a collision while driving your personal car. Fill out 1040x online Repairs to the car cost $950. Fill out 1040x online You had $100 deductible collision insurance. Fill out 1040x online Your insurance company agreed to reimburse you for the rest of the damage. Fill out 1040x online Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. Fill out 1040x online Due to the $100 rule, you cannot deduct the $100 you paid as the deductible. Fill out 1040x online When you receive the $850 from the insurance company in 2014, do not report it as income. Fill out 1040x online Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. Fill out 1040x online The deduction for casualty and theft losses of employee property and personal-use property is limited. Fill out 1040x online A loss on employee property is subject to the 2% rule, discussed next. Fill out 1040x online With certain exceptions, a loss on property you own for your personal use is subject to the $100 and 10% rules, discussed later. Fill out 1040x online The 2%, $100, and 10% rules are also summarized in Table 2 . Fill out 1040x online Losses on business property (other than employee property) and income-producing property are not subject to these rules. Fill out 1040x online However, if your casualty or theft loss involved a home you used for business or rented out, your deductible loss may be limited. Fill out 1040x online See the Instructions for Form 4684, Section B. Fill out 1040x online If the casualty or theft loss involved property used in a passive activity, see Form 8582, Passive Activity Loss Limitations, and its instructions. Fill out 1040x online 2% Rule The casualty and theft loss deduction for employee property, when added to your job expenses and most other miscellaneous itemized deductions on Schedule A (Form 1040) or Form 1040NR, Schedule A, must be reduced by 2% of your adjusted gross income. Fill out 1040x online Employee property is property used in performing services as an employee. Fill out 1040x online $100 Rule After you have figured your casualty or theft loss on personal-use property, as discussed earlier, you must reduce that loss by $100. Fill out 1040x online This reduction applies to each total casualty or theft loss. Fill out 1040x online It does not matter how many pieces of property are involved in an event. Fill out 1040x online Only a single $100 reduction applies. Fill out 1040x online Example. Fill out 1040x online You have $750 deductible collision insurance on your car. Fill out 1040x online The car is damaged in a collision. Fill out 1040x online The insurance company pays you for the damage minus the $750 deductible. Fill out 1040x online The amount of the casualty loss is based solely on the deductible. Fill out 1040x online The casualty loss is $650 ($750 − $100) because the first $100 of a casualty loss on personal-use property is not deductible. Fill out 1040x online Single event. Fill out 1040x online   Generally, events closely related in origin cause a single casualty. Fill out 1040x online 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. Fill out 1040x online A single casualty may also damage two or more pieces of property, such as a hailstorm that damages both your home and your car parked in your driveway. Fill out 1040x online Example 1. Fill out 1040x online A thunderstorm destroyed your pleasure boat. Fill out 1040x online You also lost some boating equipment in the storm. Fill out 1040x online Your loss was $5,000 on the boat and $1,200 on the equipment. Fill out 1040x online Your insurance company reimbursed you $4,500 for the damage to your boat. Fill out 1040x online You had no insurance coverage on the equipment. Fill out 1040x online Your casualty loss is from a single event and the $100 rule applies once. Fill out 1040x online Figure your loss before applying the 10% rule (discussed later) as follows. Fill out 1040x online     Boat Equipment 1. Fill out 1040x online Loss $5,000 $1,200 2. Fill out 1040x online Subtract insurance 4,500 -0- 3. Fill out 1040x online Loss after reimbursement $ 500 $1,200 4. Fill out 1040x online Total loss $1,700 5. Fill out 1040x online Subtract $100 100 6. Fill out 1040x online Loss before 10% rule $1,600 Example 2. Fill out 1040x online Thieves broke into your home in January and stole a ring and a fur coat. Fill out 1040x online You had a loss of $200 on the ring and $700 on the coat. Fill out 1040x online This is a single theft. Fill out 1040x online The $100 rule applies to the total $900 loss. Fill out 1040x online Example 3. Fill out 1040x online In September, hurricane winds blew the roof off your home. Fill out 1040x online Flood waters caused by the hurricane further damaged your home and destroyed your furniture and personal car. Fill out 1040x online This is considered a single casualty. Fill out 1040x online The $100 rule is applied to your total loss from the flood waters and the wind. Fill out 1040x online More than one loss. Fill out 1040x online   If you have more than one casualty or theft loss during your tax year, you must reduce each loss by $100. Fill out 1040x online Example. Fill out 1040x online Your family car was damaged in an accident in January. Fill out 1040x online Your loss after the insurance reimbursement was $75. Fill out 1040x online In February, your car was damaged in another accident. Fill out 1040x online This time your loss after the insurance reimbursement was $90. Fill out 1040x online Apply the $100 rule to each separate casualty loss. Fill out 1040x online Since neither accident resulted in a loss of over $100, you are not entitled to any deduction for these accidents. Fill out 1040x online More than one person. Fill out 1040x online   If two or more individuals (other than a husband and wife filing a joint return) have losses from the same casualty or theft, the $100 rule applies separately to each individual. Fill out 1040x online Example. Fill out 1040x online A fire damaged your house and also damaged the personal property of your house guest. Fill out 1040x online You must reduce your loss by $100. Fill out 1040x online Your house guest must reduce his or her loss by $100. Fill out 1040x online Married taxpayers. Fill out 1040x online   If you and your spouse file a joint return, you are treated as one individual in applying the $100 rule. Fill out 1040x online It does not matter whether you own the property jointly or separately. Fill out 1040x online   If you and your spouse have a casualty or theft loss and you file separate returns, each of you must reduce your loss by $100. Fill out 1040x online This is true even if you own the property jointly. Fill out 1040x online If one spouse owns the property, only that spouse can figure a loss deduction on a separate return. Fill out 1040x online   If the casualty or theft loss is on property you own as tenants by the entirety, each of you can figure your deduction on only one-half of the loss on separate returns. Fill out 1040x online Neither of you can figure your deduction on the entire loss on a separate return. Fill out 1040x online Each of you must reduce the loss by $100. Fill out 1040x online More than one owner. Fill out 1040x online   If two or more individuals (other than a husband and wife filing a joint return) have a loss on property jointly owned, the $100 rule applies separately to each. Fill out 1040x online For example, if two sisters live together in a home they own jointly and they have a casualty loss on the home, the $100 rule applies separately to each sister. Fill out 1040x online 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. Fill out 1040x online Apply this rule after you reduce each loss by $100. Fill out 1040x online For more information, see the Form 4684 instructions. Fill out 1040x online If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. Fill out 1040x online Example. Fill out 1040x online In June, you discovered that your house had been burglarized. Fill out 1040x online Your loss after insurance reimbursement was $2,000. Fill out 1040x online Your adjusted gross income for the year you discovered the theft is $29,500. Fill out 1040x online Figure your theft loss as follows. Fill out 1040x online 1. Fill out 1040x online Loss after insurance $2,000 2. Fill out 1040x online Subtract $100 100 3. Fill out 1040x online Loss after $100 rule $1,900 4. Fill out 1040x online Subtract 10% of $29,500 AGI $2,950 5. Fill out 1040x online 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 ($2,950). Fill out 1040x online More than one loss. Fill out 1040x online   If you have more than one casualty or theft loss during your tax year, reduce each loss by any reimbursement and by $100. Fill out 1040x online Then you must reduce the total of all your losses by 10% of your adjusted gross income. Fill out 1040x online Example. Fill out 1040x online In March, you had a car accident that totally destroyed your car. Fill out 1040x online You did not have collision insurance on your car, so you did not receive any insurance reimbursement. Fill out 1040x online Your loss on the car was $1,800. Fill out 1040x online In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items you had stored there. Fill out 1040x online Your loss on the basement items after reimbursement was $2,100. Fill out 1040x online Your adjusted gross income for the year that the accident and fire occurred is $25,000. Fill out 1040x online You figure your casualty loss deduction as follows. Fill out 1040x online     Car Basement 1. Fill out 1040x online Loss $1,800 $2,100 2. Fill out 1040x online Subtract $100 per incident 100 100 3. Fill out 1040x online Loss after $100 rule $1,700 $2,000 4. Fill out 1040x online Total loss $3,700 5. Fill out 1040x online Subtract 10% of $25,000 AGI 2,500 6. Fill out 1040x online Casualty loss deduction $1,200 Married taxpayers. Fill out 1040x online   If you and your spouse file a joint return, you are treated as one individual in applying the 10% rule. Fill out 1040x online It does not matter if you own the property jointly or separately. Fill out 1040x online   If you file separate returns, the 10% rule applies to each return on which a loss is claimed. Fill out 1040x online More than one owner. Fill out 1040x online   If two or more individuals (other than husband and wife filing a joint return) have a loss on property that is owned jointly, the 10% rule applies separately to each. Fill out 1040x online Gains and losses. Fill out 1040x online   If you have casualty or theft gains as well as losses to personal-use property, you must compare your total gains to your total losses. Fill out 1040x online 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. Fill out 1040x online Casualty or theft gains do not include gains you choose to postpone. Fill out 1040x online See Postponement of Gain, later. Fill out 1040x online Losses more than gains. Fill out 1040x online   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. Fill out 1040x online The rest, if any, is your deductible loss from personal-use property. Fill out 1040x online Example. Fill out 1040x online Your theft loss after reducing it by reimbursements and by $100 is $2,700. Fill out 1040x online Your casualty gain is $700. Fill out 1040x online Your loss is more than your gain, so you must reduce your $2,000 net loss ($2,700 − $700) by 10% of your adjusted gross income. Fill out 1040x online Gains more than losses. Fill out 1040x online   If your recognized gains are more than your losses, subtract your losses from your gains. Fill out 1040x online The difference is treated as a capital gain and must be reported on Schedule D (Form 1040). Fill out 1040x online The 10% rule does not apply to your gains. Fill out 1040x online Example. Fill out 1040x online Your theft loss is $600 after reducing it by reimbursements and by $100. Fill out 1040x online Your casualty gain is $1,600. Fill out 1040x online Because your gain is more than your loss, you must report the $1,000 net gain ($1,600 − $600) on Schedule D (Form 1040). Fill out 1040x online More information. Fill out 1040x online   For information on how to figure recognized gains, see Figuring a Gain , later. Fill out 1040x online Figuring the Deduction Generally, you must figure your loss separately for each item stolen, damaged, or destroyed. Fill out 1040x online However, a special rule applies to real property you own for personal use. Fill out 1040x online Real property. Fill out 1040x online   In figuring a loss to real estate you own for personal use, all improvements (such as buildings and ornamental trees and the land containing the improvements) are considered together. Fill out 1040x online Example 1. Fill out 1040x online In June, a fire destroyed your lakeside cottage, which cost $144,800 (including $14,500 for the land) several years ago. Fill out 1040x online (Your land was not damaged. Fill out 1040x online ) This was your only casualty or theft loss for the year. Fill out 1040x online The FMV of the property immediately before the fire was $180,000 ($145,000 for the cottage and $35,000 for the land). Fill out 1040x online The FMV immediately after the fire was $35,000 (value of the land). Fill out 1040x online You collected $130,000 from the insurance company. Fill out 1040x online Your adjusted gross income for the year the fire occurred is $80,000. Fill out 1040x online Your deduction for the casualty loss is $6,700, figured in the following manner. Fill out 1040x online 1. Fill out 1040x online Adjusted basis of the entire property (cost in this example) $144,800 2. Fill out 1040x online FMV of entire property  before fire $180,000 3. Fill out 1040x online FMV of entire property after fire 35,000 4. Fill out 1040x online Decrease in FMV of entire property (line 2 − line 3) $145,000 5. Fill out 1040x online Loss (smaller of line 1 or line 4) $144,800 6. Fill out 1040x online Subtract insurance 130,000 7. Fill out 1040x online Loss after reimbursement $14,800 8. Fill out 1040x online Subtract $100 100 9. Fill out 1040x online Loss after $100 rule $14,700 10. Fill out 1040x online Subtract 10% of $80,000 AGI 8,000 11. Fill out 1040x online Casualty loss deduction $ 6,700 Example 2. Fill out 1040x online You bought your home a few years ago. Fill out 1040x online You paid $150,000 ($10,000 for the land and $140,000 for the house). Fill out 1040x online You also spent an additional $2,000 for landscaping. Fill out 1040x online This year a fire destroyed your home. Fill out 1040x online The fire also damaged the shrubbery and trees in your yard. Fill out 1040x online The fire was your only casualty or theft loss this year. Fill out 1040x online Competent appraisers valued the property as a whole at $175,000 before the fire, but only $50,000 after the fire. Fill out 1040x online Shortly after the fire, the insurance company paid you $95,000 for the loss. Fill out 1040x online Your adjusted gross income for this year is $70,000. Fill out 1040x online You figure your casualty loss deduction as follows. Fill out 1040x online 1. Fill out 1040x online Adjusted basis of the entire property (cost of land, building, and landscaping) $152,000 2. Fill out 1040x online FMV of entire property  before fire $175,000 3. Fill out 1040x online FMV of entire property after fire 50,000 4. Fill out 1040x online Decrease in FMV of entire property (line 2 − line 3) $125,000 5. Fill out 1040x online Loss (smaller of line 1 or line 4) $125,000 6. Fill out 1040x online Subtract insurance 95,000 7. Fill out 1040x online Loss after reimbursement $30,000 8. Fill out 1040x online Subtract $100 100 9. Fill out 1040x online Loss after $100 rule $29,900 10. Fill out 1040x online Subtract 10% of $70,000 AGI 7,000 11. Fill out 1040x online Casualty loss deduction $ 22,900 Personal property. Fill out 1040x online   Personal property is any property that is not real property. Fill out 1040x online 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. Fill out 1040x online Then combine these separate losses to figure the total loss. Fill out 1040x online Reduce the total loss by $100 and 10% of your adjusted gross income to figure the loss deduction. Fill out 1040x online Example 1. Fill out 1040x online In August, a storm destroyed your pleasure boat, which cost $18,500. Fill out 1040x online This was your only casualty or theft loss for the year. Fill out 1040x online Its FMV immediately before the storm was $17,000. Fill out 1040x online You had no insurance, but were able to salvage the motor of the boat and sell it for $200. Fill out 1040x online Your adjusted gross income for the year the casualty occurred is $70,000. Fill out 1040x online Although the motor was sold separately, it is part of the boat and not a separate item of property. Fill out 1040x online You figure your casualty loss deduction as follows. Fill out 1040x online 1. Fill out 1040x online Adjusted basis (cost in this example) $18,500 2. Fill out 1040x online FMV before storm $17,000 3. Fill out 1040x online FMV after storm 200 4. Fill out 1040x online Decrease in FMV  (line 2 − line 3) $16,800 5. Fill out 1040x online Loss (smaller of line 1 or line 4) $16,800 6. Fill out 1040x online Subtract insurance -0- 7. Fill out 1040x online Loss after reimbursement $16,800 8. Fill out 1040x online Subtract $100 100 9. Fill out 1040x online Loss after $100 rule $16,700 10. Fill out 1040x online Subtract 10% of $70,000 AGI 7,000 11. Fill out 1040x online Casualty loss deduction $ 9,700 Example 2. Fill out 1040x online In June, you were involved in an auto accident that totally destroyed your personal car and your antique pocket watch. Fill out 1040x online You had bought the car for $30,000. Fill out 1040x online The FMV of the car just before the accident was $17,500. Fill out 1040x online Its FMV just after the accident was $180 (scrap value). Fill out 1040x online Your insurance company reimbursed you $16,000. Fill out 1040x online Your watch was not insured. Fill out 1040x online You had purchased it for $250. Fill out 1040x online Its FMV just before the accident was $500. Fill out 1040x online Your adjusted gross income for the year the accident occurred is $97,000. Fill out 1040x online Your casualty loss deduction is zero, figured as follows. Fill out 1040x online     Car Watch 1. Fill out 1040x online Adjusted basis (cost) $30,000 $250 2. Fill out 1040x online FMV before accident $17,500 $500 3. Fill out 1040x online FMV after accident 180 -0- 4. Fill out 1040x online Decrease in FMV (line 2 − line 3) $17,320 $500 5. Fill out 1040x online Loss (smaller of line 1 or line 4) $17,320 $250 6. Fill out 1040x online Subtract insurance 16,000 -0- 7. Fill out 1040x online Loss after reimbursement $1,320 $250 8. Fill out 1040x online Total loss $1,570 9. Fill out 1040x online Subtract $100 100 10. Fill out 1040x online Loss after $100 rule $1,470 11. Fill out 1040x online Subtract 10% of $97,000 AGI 9,700 12. Fill out 1040x online Casualty loss deduction $ -0- Both real and personal properties. Fill out 1040x online   When a casualty involves both real and personal properties, you must figure the loss separately for each type of property. Fill out 1040x online However, you apply a single $100 reduction to the total loss. Fill out 1040x online Then, you apply the 10% rule to figure the casualty loss deduction. Fill out 1040x online Example. Fill out 1040x online In July, a hurricane damaged your home, which cost you $164,000 including land. Fill out 1040x online The FMV of the property (both building and land) immediately before the storm was $170,000 and its FMV immediately after the storm was $100,000. Fill out 1040x online Your household furnishings were also damaged. Fill out 1040x online You separately figured the loss on each damaged household item and arrived at a total loss of $600. Fill out 1040x online You collected $50,000 from the insurance company for the damage to your home, but your household furnishings were not insured. Fill out 1040x online Your adjusted gross income for the year the hurricane occurred is $65,000. Fill out 1040x online You figure your casualty loss deduction from the hurricane in the following manner. Fill out 1040x online 1. Fill out 1040x online Adjusted basis of real property (cost in this example) $164,000 2. Fill out 1040x online FMV of real property before hurricane $170,000 3. Fill out 1040x online FMV of real property after hurricane 100,000 4. Fill out 1040x online Decrease in FMV of real property (line 2 − line 3) $70,000 5. Fill out 1040x online Loss on real property (smaller of line 1 or line 4) $70,000 6. Fill out 1040x online Subtract insurance 50,000 7. Fill out 1040x online Loss on real property after reimbursement $20,000 8. Fill out 1040x online Loss on furnishings $600 9. Fill out 1040x online Subtract insurance -0- 10. Fill out 1040x online Loss on furnishings after reimbursement $600 11. Fill out 1040x online Total loss (line 7 plus line 10) $20,600 12. Fill out 1040x online Subtract $100 100 13. Fill out 1040x online Loss after $100 rule $20,500 14. Fill out 1040x online Subtract 10% of $65,000 AGI 6,500 15. Fill out 1040x online Casualty loss deduction $14,000 Property used partly for business and partly for personal purposes. Fill out 1040x online   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 portion and for the business or income-producing portion. Fill out 1040x online You must figure each loss separately because the losses attributed to these two uses are figured in two different ways. Fill out 1040x online When figuring each loss, allocate the total cost or basis, the FMV before and after the casualty or theft loss, and the insurance or other reimbursement between the business and personal use of the property. Fill out 1040x online The $100 rule and the 10% rule apply only to the casualty or theft loss on the personal-use portion of the property. Fill out 1040x online Example. Fill out 1040x online You own a building that you constructed on leased land. Fill out 1040x online You use half of the building for your business and you live in the other half. Fill out 1040x online The cost of the building was $400,000. Fill out 1040x online You made no further improvements or additions to it. Fill out 1040x online A flood in March damaged the entire building. Fill out 1040x online The FMV of the building was $380,000 immediately before the flood and $320,000 afterwards. Fill out 1040x online Your insurance company reimbursed you $40,000 for the flood damage. Fill out 1040x online Depreciation on the business part of the building before the flood totaled $24,000. Fill out 1040x online Your adjusted gross income for the year the flood occurred is $125,000. Fill out 1040x online You have a deductible business casualty loss of $10,000. Fill out 1040x online You do not have a deductible personal casualty loss because of the 10% rule. Fill out 1040x online You figure your loss as follows. Fill out 1040x online     Business   Personal     Part   Part 1. Fill out 1040x online Cost (total $400,000) $200,000   $200,000 2. Fill out 1040x online Subtract depreciation 24,000   -0- 3. Fill out 1040x online Adjusted basis $176,000   $200,000 4. Fill out 1040x online FMV before flood (total $380,000) $190,000   $190,000 5. Fill out 1040x online FMV after flood (total $320,000) 160,000   160,000 6. Fill out 1040x online Decrease in FMV  (line 4 − line 5) $30,000   $30,000 7. Fill out 1040x online Loss (smaller of line 3 or line 6) $30,000   $30,000 8. Fill out 1040x online Subtract insurance 20,000   20,000 9. Fill out 1040x online Loss after reimbursement $10,000   $10,000 10. Fill out 1040x online Subtract $100 on personal-use property -0-   100 11. Fill out 1040x online Loss after $100 rule $10,000   $9,900 12. Fill out 1040x online Subtract 10% of $125,000 AGI on personal-use property -0-   12,500 13. Fill out 1040x online Deductible business loss $10,000     14. Fill out 1040x online Deductible personal loss $-0- Figuring a Gain 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. Fill out 1040x online Your gain is figured as follows. Fill out 1040x online The amount you receive (discussed next), minus Your adjusted basis in the property at the time of the casualty or theft. Fill out 1040x online See Adjusted Basis , earlier, for information on adjusted basis. Fill out 1040x online 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. Fill out 1040x online Amount you receive. Fill out 1040x online   The amount you receive includes any money plus the value of any property you receive minus any expenses you have in obtaining reimbursement. Fill out 1040x online It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. Fill out 1040x online Example. Fill out 1040x online A hurricane destroyed your personal residence and the insurance company awarded you $145,000. Fill out 1040x online You received $140,000 in cash. Fill out 1040x online The remaining $5,000 was paid directly to the holder of a mortgage on the property. Fill out 1040x online The amount you received includes the $5,000 reimbursement paid on the mortgage. Fill out 1040x online Main home destroyed. Fill out 1040x online   If you have a gain because your main home was destroyed, you generally can exclude the gain from your income as if you had sold or exchanged your home. Fill out 1040x online You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). Fill out 1040x online To exclude a gain, you generally must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date it was destroyed. Fill out 1040x online For information on this exclusion, see Publication 523. Fill out 1040x online 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. Fill out 1040x online See Postponement of Gain , later. Fill out 1040x online Reporting a gain. Fill out 1040x online   You generally must report your gain as income in the year you receive the reimbursement. Fill out 1040x online However, you do not have to report your gain if you meet certain requirements and choose to postpone reporting the gain according to the rules explained under Postponement of Gain, next. Fill out 1040x online   For information on how to report a gain, see How To Report Gains and Losses , later. Fill out 1040x online    If you have a casualty or theft gain on personal-use property that you choose to postpone reporting (as explained next) and you also have another casualty or theft loss on personal-use property, do not consider the gain you are postponing when figuring your casualty or theft loss deduction. Fill out 1040x online See 10% Rule under Deduction Limits, earlier. Fill out 1040x online Postponement of 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 or stolen property. Fill out 1040x online Your basis in the new property is generally the same as your adjusted basis in the property it replaces. Fill out 1040x online You must ordinarily report the gain on your stolen or destroyed property if you receive money or unlike property as reimbursement. Fill out 1040x online However, you can choose to postpone reporting the gain if you purchase property that is similar or related in service or use to the stolen or destroyed property within a specified replacement period, discussed later. Fill out 1040x online You also can choose to postpone reporting the gain if you purchase a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the property. Fill out 1040x online See Controlling interest in a corporation , later. Fill out 1040x online If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. Fill out 1040x online To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. Fill out 1040x online 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. Fill out 1040x online Example. Fill out 1040x online In 1970, you bought an oceanfront cottage for your personal use at a cost of $18,000. Fill out 1040x online You made no further improvements or additions to it. Fill out 1040x online When a storm destroyed the cottage this January, the cottage was worth $250,000. Fill out 1040x online You received $146,000 from the insurance company in March. Fill out 1040x online You had a gain of $128,000 ($146,000 − $18,000). Fill out 1040x online You spent $144,000 to rebuild the cottage. Fill out 1040x online Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. Fill out 1040x online Buying replacement property from a related person. Fill out 1040x online   You cannot postpone reporting a gain from a casualty or theft if you buy the replacement property from a related person (discussed later). Fill out 1040x online This rule applies to the following taxpayers. Fill out 1040x online C corporations. Fill out 1040x online Partnerships in which more than 50% of the capital or profits interests is owned by C corporations. Fill out 1040x online All others (including individuals, partnerships — other than those in (2) — and S corporations) if the total realized gain for the tax year on all destroyed or stolen properties on which there are realized gains is more than $100,000. Fill out 1040x online For casualties and thefts described in (3) above, gains cannot be offset by any losses when determining whether the total gain is more than $100,000. Fill out 1040x online If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Fill out 1040x online If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Fill out 1040x online Exception. Fill out 1040x online   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 destroyed or stolen property. Fill out 1040x online Related persons. Fill out 1040x online   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. Fill out 1040x online For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Fill out 1040x online Death of a taxpayer. Fill out 1040x online   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. Fill out 1040x online The executor of the estate or the person succeeding to the funds from the casualty or theft cannot postpone reporting the gain by buying replacement property. Fill out 1040x online Replacement Property You must buy replacement property for the specific purpose of replacing your destroyed or stolen property. Fill out 1040x online Property you acquire as a gift or inheritance does not qualify. Fill out 1040x online You do not have to use the same funds you receive as