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Free Amended Tax Return

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Free Amended Tax Return

Free amended tax return Publication 1212 - Main Content Table of Contents Definitions Debt Instruments on the OID List Debt Instruments Not on the OID List Information for Brokers and Other MiddlemenShort-Term Obligations Redeemed at Maturity Long-Term Debt Instruments Certificates of Deposit Bearer Bonds and Coupons Backup Withholding Information for Owners of OID Debt InstrumentsExceptions. Free amended tax return Adjustment for premium. Free amended tax return Adjustment for acquisition premium. Free amended tax return Adjustment for market discount. Free amended tax return Form 1099-OID How To Report OID Figuring OID on Long-Term Debt Instruments Figuring OID on Stripped Bonds and Coupons How To Get Tax HelpLow Income Taxpayer Clinics Definitions The following terms are used throughout this publication. Free amended tax return “Original issue discount” is defined first. Free amended tax return The other terms are listed alphabetically. Free amended tax return Original issue discount (OID). Free amended tax return   OID is a form of interest. Free amended tax return It is the excess of a debt instrument's stated redemption price at maturity over its issue price (acquisition price for a stripped bond or coupon). Free amended tax return Zero coupon bonds and debt instruments that pay no stated interest until maturity are examples of debt instruments that have OID. Free amended tax return Accrual period. Free amended tax return   An accrual period is an interval of time used to measure OID. Free amended tax return The length of an accrual period can be 6 months, a year, or some other period, depending on when the debt instrument was issued. Free amended tax return Acquisition premium. Free amended tax return   Acquisition premium is the excess of a debt instrument's adjusted basis immediately after purchase, including purchase at original issue, over the debt instrument's adjusted issue price at that time. Free amended tax return A debt instrument does not have acquisition premium, however, if the debt instrument was purchased at a premium. Free amended tax return See Premium, later. Free amended tax return Adjusted issue price. Free amended tax return   The adjusted issue price of a debt instrument at the beginning of an accrual period is used to figure the OID allocable to that period. Free amended tax return In general, the adjusted issue price at the beginning of the debt instrument's first accrual period is its issue price. Free amended tax return The adjusted issue price at the beginning of any subsequent accrual period is the sum of the issue price and all the OID includible in income before that accrual period minus any payment previously made on the debt instrument, other than a payment of qualified stated interest. Free amended tax return Debt instrument. Free amended tax return   The term “debt instrument” means any instrument or contractual arrangement that constitutes indebtedness under general principles of federal income tax law (including, for example, a bond, debenture, note, certificate, or other evidence of indebtedness). Free amended tax return It generally does not include an annuity contract. Free amended tax return Issue price. Free amended tax return   For debt instruments listed in Section I-A and Section I-B, the issue price generally is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of these instruments was sold. Free amended tax return Market discount. Free amended tax return   Market discount arises when a debt instrument purchased in the secondary market has decreased in value since its issue date, generally because of an increase in interest rates. Free amended tax return An OID debt instrument has market discount if your adjusted basis in the debt instrument immediately after you acquired it (usually its purchase price) was less than the debt instrument's issue price plus the total OID that accrued before you acquired it. Free amended tax return The market discount is the difference between the issue price plus accrued OID and your adjusted basis. Free amended tax return Premium. Free amended tax return   A debt instrument is purchased at a premium if its adjusted basis immediately after purchase is greater than the total of all amounts payable on the debt instrument after the purchase date, other than qualified stated interest. Free amended tax return The premium is the excess of the adjusted basis over the payable amounts. Free amended tax return See Publication 550 for information on the tax treatment of bond premium. Free amended tax return Qualified stated interest. Free amended tax return   In general, qualified stated interest is stated interest that is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually over the term of the debt instrument at a single fixed rate. Free amended tax return Stated redemption price at maturity. Free amended tax return   A debt instrument's stated redemption price at maturity is the sum of all amounts (principal and interest) payable on the debt instrument other than qualified stated interest. Free amended tax return Yield to maturity (YTM). Free amended tax return   In general, the YTM is the discount rate that, when used in figuring the present value of all principal and interest payments, produces an amount equal to the issue price of the debt instrument. Free amended tax return The YTM is generally shown on the face of the debt instrument or in the literature you receive from your broker. Free amended tax return If you do not have this information, consult your broker, tax advisor, or the issuer. Free amended tax return Debt Instruments on the OID List The OID list on the IRS website can be used by brokers and other middlemen to prepare information returns. Free amended tax return If you own a listed debt instrument, you generally should not rely on the information in the OID list to determine (or compare) the OID to be reported on your tax return. Free amended tax return The OID amounts listed are figured without reference to the price or date at which you acquired the debt instrument. Free amended tax return For information about determining the OID to be reported on your tax return, see the instructions for figuring OID under Information for Owners of OID Debt Instruments, later. Free amended tax return The following discussions explain what information is contained in each section of the list. Free amended tax return Section I. Free amended tax return   This section contains publicly offered, long-term debt instruments. Free amended tax return Section I-A: Corporate Debt Instruments Issued Before 1985. Free amended tax return Section I-B: Corporate Debt Instruments Issued After 1984. Free amended tax return Section I-C: Inflation-Indexed Debt Instruments. Free amended tax return For each publicly offered debt instrument in Section I, the list contains the following information. Free amended tax return The name of the issuer. Free amended tax return The Committee on Uniform Security Identification Procedures (CUSIP) number. Free amended tax return The issue date. Free amended tax return The maturity date. Free amended tax return The issue price expressed as a percent of principal or of stated redemption price at maturity. Free amended tax return The annual stated or coupon interest rate. Free amended tax return (This rate is shown as 0. Free amended tax return 00 if no annual interest payments are provided. Free amended tax return ) The yield to maturity will be added to Section I-B for bonds issued after December 31, 2006. Free amended tax return The total OID accrued up to January 1 of a calendar year. Free amended tax return (This information is not available for every instrument. Free amended tax return ) For long-term debt instruments issued after July 1, 1982, the daily OID for the accrual periods falling in a calendar year and a subsequent year. Free amended tax return The total OID per $1,000 of principal or maturity value for a calendar year and a subsequent year. Free amended tax return Section II. Free amended tax return   This section contains stripped coupons and principal components of U. Free amended tax return S. Free amended tax return Treasury and Government-Sponsored Enterprise debt instruments. Free amended tax return These stripped components are available through the Department of the Treasury's Separate Trading of Registered Interest and Principal of Securities (STRIPS) program and government-sponsored enterprises such as the Resolution Funding Corporation. Free amended tax return This section also includes debt instruments backed by U. Free amended tax return S. Free amended tax return Treasury securities that represent ownership interests in those securities. Free amended tax return   The obligations listed in Section II are arranged by maturity date. Free amended tax return The amounts listed are the total OID for a calendar year per $1,000 of redemption price. Free amended tax return Section III. Free amended tax return   This section contains short-term discount obligations. Free amended tax return Section III-A: Short-Term U. Free amended tax return S. Free amended tax return Treasury Bills. Free amended tax return Section III-B: Federal Home Loan Banks. Free amended tax return Section III-C: Federal National Mortgage Association. Free amended tax return Section III-D: Federal Farm Credit Banks. Free amended tax return Section III-E: Federal Home Loan Mortgage Corporation. Free amended tax return Section III-F: Federal Agricultural Mortgage Corporation. Free amended tax return    Information that supplements Section III-A is available on the Internet at http://www. Free amended tax return treasurydirect. Free amended tax return gov/tdhome. Free amended tax return htm. Free amended tax return   The short-term obligations listed in this section are arranged by maturity date. Free amended tax return For each obligation, the list contains the CUSIP number, maturity date, issue date, issue price (expressed as a percent of principal), and discount to be reported as interest for a calendar year per $1,000 of redemption price. Free amended tax return Brokers and other middlemen should rely on the issue price information in Section III only if they are unable to determine the price actually paid by the owner. Free amended tax return Debt Instruments Not on the OID List The list of debt instruments discussed earlier does not contain the following items. Free amended tax return U. Free amended tax return S. Free amended tax return savings bonds. Free amended tax return Certificates of deposit and other face-amount certificates issued at a discount, including syndicated certificates of deposit. Free amended tax return Obligations issued by tax-exempt organizations. Free amended tax return OID debt instruments that matured or were entirely called by the issuer before the tables were posted on the IRS website. Free amended tax return Mortgage-backed securities and mortgage participation certificates. Free amended tax return Long-term OID debt instruments issued before May 28, 1969. Free amended tax return Short-term obligations, other than the obligations listed in Section III. Free amended tax return Debt instruments issued at a discount by states or their political subdivisions. Free amended tax return REMIC regular interests and CDOs. Free amended tax return Commercial paper and banker's acceptances issued at a discount. Free amended tax return Obligations issued at a discount by individuals. Free amended tax return Foreign obligations not traded in the United States and obligations not issued in the United States. Free amended tax return Information for Brokers and Other Middlemen The following discussions contain specific instructions for brokers and middlemen who hold or redeem a debt instrument for the owner. Free amended tax return In general, you must file a Form 1099 for the debt instrument if the interest or OID to be included in the owner's income for a calendar year totals $10 or more. Free amended tax return You also must file a Form 1099 if you were required to deduct and withhold tax, even if the interest or OID is less than $10. Free amended tax return See Backup Withholding, later. Free amended tax return If you must file a Form 1099, furnish a copy to the owner of the debt instrument by January 31 in the year it is due. Free amended tax return File all your Forms 1099 with the IRS, accompanied by Form 1096, by February 28 in the year it is due (March 31 if you file electronically). Free amended tax return Electronic payee statements. Free amended tax return   You can issue Form 1099-OID electronically with the consent of the recipient. Free amended tax return More information. Free amended tax return   For more information, including penalties for failure to file (or furnish) required information returns or statements, see the General Instructions for Certain Information Returns (Forms 1098, 1099, 3921, 3922, 5498, and W-2G) for the appropriate calendar year. Free amended tax return Short-Term Obligations Redeemed at Maturity If you redeem a short-term discount obligation for the owner at maturity, you must report the discount as interest on Form 1099-INT. Free amended tax return To figure the discount, use the purchase price shown on the owner's copy of the purchase confirmation receipt or similar record, or the price shown in your transaction records. Free amended tax return If you sell the obligation for the owner before maturity, you must file Form 1099-B to reflect the gross proceeds to the seller. Free amended tax return Do not report the accrued discount to the date of sale on either Form 1099-INT or Form 1099-OID. Free amended tax return If the owner's purchase price cannot be determined, figure the discount as if the owner had purchased the obligation at its original issue price. Free amended tax return A special rule is used to determine the original issue price for information reporting on U. Free amended tax return S. Free amended tax return Treasury bills (T-bills) listed in Section III-A. Free amended tax return Under this rule, you treat as the original issue price of the T-bill the noncompetitive (weighted average of accepted auction bids) discount price for the longest-maturity T-bill maturing on the same date as the T-bill being redeemed. Free amended tax return This noncompetitive discount price is the issue price (expressed as a percent of principal) shown in Section III-A. Free amended tax return A similar rule is used to figure the discount on short-term discount obligations issued by the organizations listed in Section III-B through Section III-F. Free amended tax return Example 1. Free amended tax return There are 13-week and 26-week T-bills maturing on the same date as the T-bill being redeemed. Free amended tax return The price actually paid by the owner cannot be established by owner or middleman records. Free amended tax return You treat as the issue price of the T-bill the noncompetitive discount price (expressed as a percent of principal) shown in Section III-A for a 26-week bill maturing on the same date as the T-bill redeemed. Free amended tax return The interest you report on Form 1099-INT is the OID (per $1,000 of principal) shown in Section III-A for that obligation. Free amended tax return Long-Term Debt Instruments If you hold a long-term OID debt instrument as a nominee for the true owner, you generally must file Form 1099-OID. Free amended tax return For this purpose, you can rely on Section I of the OID list to determine the following information. Free amended tax return Whether a debt instrument has OID. Free amended tax return The OID to be reported on the Form 1099-OID. Free amended tax return In general, you must report OID on publicly offered, long-term debt instruments listed in Section I. Free amended tax return You also can report OID on other long-term debt instruments. Free amended tax return Form 1099-OID. Free amended tax return   On Form 1099-OID for a calendar year show the following information. Free amended tax return Box 1. Free amended tax return The OID for the actual dates the owner held the debt instruments during a calendar year. Free amended tax return To determine this amount, see Figuring OID, next. Free amended tax return Box 2. Free amended tax return The qualified stated interest paid or credited during the calendar year. Free amended tax return Interest reported here is not reported on Form 1099-INT. Free amended tax return The qualified stated interest on Treasury inflation-protected securities may be reported on Form 1099-INT in box 3 instead. Free amended tax return Box 3. Free amended tax return Any interest or principal forfeited because of an early withdrawal that the owner can deduct from gross income. Free amended tax return Do not reduce the amounts in boxes 1 and 2 by the forfeiture. Free amended tax return Box 4. Free amended tax return Any backup withholding for this debt instrument. Free amended tax return Box 7. Free amended tax return The CUSIP number, if any. Free amended tax return If there is no CUSIP number, give a description of the debt instrument, including the abbreviation for the stock exchange, the abbreviation used by the stock exchange for the issuer, the coupon rate, and the year of maturity (for example, NYSE XYZ 12. Free amended tax return 50 2006). Free amended tax return If the issuer of the debt instrument is other than the payer, show the name of the issuer in this box. Free amended tax return Box 8. Free amended tax return The OID on a U. Free amended tax return S. Free amended tax return Treasury obligation for the part of the year the owner held the debt instrument. Free amended tax return Box 9. Free amended tax return Investment expenses passed on to holders of a single-class REMIC. Free amended tax return Boxes 10-12. Free amended tax return Use to report any state income tax withheld for this debt instrument. Free amended tax return Figuring OID. Free amended tax return   You can determine the OID on a long-term debt instrument by using either of the following. Free amended tax return Section I of the OID list. Free amended tax return The income tax regulations. Free amended tax return Using Section I. Free amended tax return   If the owner held the debt instrument for the entire calendar year, report the OID shown in Section I for the calendar year. Free amended tax return Because OID is listed for each $1,000 of stated redemption price at maturity, you must adjust the listed amount to reflect the debt instrument's actual stated redemption price at maturity. Free amended tax return For example, if the debt instrument's stated redemption price at maturity is $500, report one-half the listed OID. Free amended tax return   If the owner held the debt instrument for less than the entire calendar year, figure the OID to report as follows. Free amended tax return Look up the daily OID for the first accrual period in the calendar year during which the owner held the debt instrument. Free amended tax return Multiply the daily OID by the number of days the owner held the debt instrument during that accrual period. Free amended tax return Repeat steps (1) and (2) for any remaining accrual periods for the year during which the owner held the debt instrument. Free amended tax return Add the results in steps (2) and (3) to determine the owner's OID per $1,000 of stated redemption price at maturity. Free amended tax return If necessary, adjust the OID in (4) to reflect the debt instrument's stated redemption price at maturity. Free amended tax return Report the result on Form 1099-OID in box 1. Free amended tax return Using the income tax regulations. Free amended tax return   Instead of using Section I to figure OID, you can use the regulations under sections 1272 through 1275 of the Internal Revenue Code. Free amended tax return For example, under the regulations, you can use monthly accrual periods in figuring OID for a debt instrument issued after April 3, 1994, that provides for monthly payments. Free amended tax return (If you use Section I-B, the OID is figured using 6-month accrual periods. Free amended tax return )   For a general explanation of the rules for figuring OID under the regulations, see Figuring OID on Long-Term Debt Instruments under Information for Owners of OID Debt Instruments, later. Free amended tax return Certificates of Deposit If you hold a bank certificate of deposit (CD) as a nominee, you must determine whether the CD has OID and any OID includible in the income of the owner. Free amended tax return You must file an information return showing the reportable interest and OID, if any, on the CD. Free amended tax return These rules apply whether or not you sold the CD to the owner. Free amended tax return Report OID on a CD in the same way as OID on other debt instruments. Free amended tax return See Short-Term Obligations Redeemed at Maturity and Long-Term Debt Instruments, earlier. Free amended tax return Bearer Bonds and Coupons If a coupon from a bearer bond is presented to you for collection before the bond matures, you generally must report the interest on Form 1099-INT. Free amended tax return However, do not report the interest if either of the following apply. Free amended tax return You hold the bond as a nominee for the true owner. Free amended tax return The payee is a foreign person. Free amended tax return See Payments to foreign person under Backup Withholding, later. Free amended tax return Because you cannot assume the presenter of the coupon also owns the bond, you should not report OID on the bond on Form 1099-OID. Free amended tax return The coupon may have been “stripped” (separated) from the bond and separately purchased. Free amended tax return However, if a long-term bearer bond on the OID list is presented to you for redemption upon call or maturity, you should prepare a Form 1099-OID showing the OID for that calendar year, as well as any coupon interest payments collected at the time of redemption. Free amended tax return Backup Withholding If you report OID on Form 1099-OID or interest on Form 1099-INT for a calendar year, you may be required to apply backup withholding to the reportable payment at a rate of 28%. Free amended tax return The backup withholding is deducted at the time a cash payment is made. Free amended tax return See Pub. Free amended tax return 1281, Backup Withholding for Missing and Incorrect Name/TIN(s), for more information. Free amended tax return Backup withholding generally applies in the following situations. Free amended tax return The payee does not give you a taxpayer identification number (TIN). Free amended tax return The IRS notifies you that the payee gave an incorrect TIN. Free amended tax return The IRS notifies you that the payee is subject to backup withholding due to payee underreporting. Free amended tax return For debt instruments acquired after 1983: The payee does not certify, under penalties of perjury, that he or she is not subject to backup withholding under (3), or The payee does not certify, under penalties of perjury, that the TIN given is correct. Free amended tax return However, for short-term discount obligations (other than government obligations), bearer bonds and coupons, and U. Free amended tax return S. Free amended tax return savings bonds, backup withholding applies only if the payee does not give you a TIN or gives you an obviously incorrect number for a TIN. Free amended tax return Short-term obligations. Free amended tax return   Backup withholding applies to OID on a short-term obligation only when the OID is paid at maturity. Free amended tax return However, backup withholding applies to any interest payable before maturity when the interest is paid or credited. Free amended tax return   If the owner of a short-term obligation at maturity is not the original owner and can establish the purchase price of the obligation, the amount subject to backup withholding must be determined by treating the purchase price as the issue price. Free amended tax return However, you can choose to disregard that price if it would require significant manual intervention in the computer or recordkeeping system used for the obligation. Free amended tax return If the purchase price of a listed obligation is not established or is disregarded, you must use the issue price shown in Section III. Free amended tax return Long-term obligations. Free amended tax return   If no cash payments are made on a long-term obligation before maturity, backup withholding applies only at maturity. Free amended tax return The amount subject to backup withholding is the OID includible in the owner's gross income for the calendar year when the obligation matures. Free amended tax return The amount to be withheld is limited to the cash paid. Free amended tax return Registered long-term obligations with cash payments. Free amended tax return   If a registered long-term obligation has cash payments before maturity, backup withholding applies when a cash payment is made. Free amended tax return The amount subject to backup withholding is the total of the qualified stated interest (defined earlier under Definitions) and OID includible in the owner's gross income for the calendar year when the payment is made. Free amended tax return If more than one cash payment is made during the year, the OID subject to withholding for the year must be allocated among the expected cash payments in the ratio that each bears to the total of the expected cash payments. Free amended tax return For any payment, the required withholding is limited to the cash paid. Free amended tax return Payee not the original owner. Free amended tax return   If the payee is not the original owner of the obligation, the OID subject to backup withholding is the OID includible in the gross income of all owners during the calendar year (without regard to any amount paid by the new owner at the time of transfer). Free amended tax return The amount subject to backup withholding at maturity of a listed obligation must be determined using the issue price shown in Section I. Free amended tax return Bearer long-term obligations with cash payments. Free amended tax return   If a bearer long-term obligation has cash payments before maturity, backup withholding applies when the cash payments are made. Free amended tax return For payments before maturity, the amount subject to withholding is the qualified stated interest (defined earlier under Definitions) includible in the owner's gross income for the calendar year. Free amended tax return For a payment at maturity, the amount subject to withholding is only the total of any qualified stated interest paid at maturity and the OID includible in the owner's gross income for the calendar year when the obligation matures. Free amended tax return The required withholding at maturity is limited to the cash paid. Free amended tax return Sales and redemptions. Free amended tax return   If you report the gross proceeds from a sale, exchange, or redemption of a debt instrument on Form 1099-B for a calendar year, you may be required to withhold 28% of the amount reported. Free amended tax return Backup withholding applies in the following situations. Free amended tax return The payee does not give you a TIN. Free amended tax return The IRS notifies you that the payee gave an incorrect TIN. Free amended tax return For debt instruments held in an account opened after 1983, the payee does not certify, under penalties of perjury, that the TIN given is correct. Free amended tax return Payments outside the United States to U. Free amended tax return S. Free amended tax return person. Free amended tax return   The requirements for backup withholding and information reporting apply to payments of OID and interest made outside the United States to a U. Free amended tax return S. Free amended tax return person, a controlled foreign corporation, or a foreign person at least 50% of whose income for the preceding 3-year period is effectively connected with the conduct of a U. Free amended tax return S. Free amended tax return trade or business. Free amended tax return Payments to foreign person. Free amended tax return   The following discussions explain the rules for backup withholding and information reporting on payments to foreign persons. Free amended tax return U. Free amended tax return S. Free amended tax return -source amount. Free amended tax return   Backup withholding and information reporting are not required for payments of U. Free amended tax return S. Free amended tax return -source OID, interest, or proceeds from a sale or redemption of an OID instrument if the payee has given you proof (generally the appropriate Form W-8 or an acceptable substitute) that the payee is a foreign person. Free amended tax return A U. Free amended tax return S. Free amended tax return resident is not a foreign person. Free amended tax return For proof of the payee's foreign status, you can rely on the appropriate Form W-8 or on documentary evidence for payments made outside the United States to an offshore account or, in case of broker proceeds, a sale effected outside the United States. Free amended tax return Receipt of the appropriate Form W-8 does not relieve you from information reporting and backup withholding if you actually know the payee is a U. Free amended tax return S. Free amended tax return person. Free amended tax return   For information about the 28% withholding tax that may apply to payments of U. Free amended tax return S. Free amended tax return -source OID or interest to foreign persons, see Publication 515. Free amended tax return Foreign-source amount. Free amended tax return   Backup withholding and information reporting are not required for payments of foreign-source OID and interest made outside the United States. Free amended tax return However, if the payments are made inside the United States, the requirements for backup withholding and information reporting will apply unless the payee has given you the appropriate Form W-8 or acceptable substitute as proof that the payee is a foreign person. Free amended tax return More information. Free amended tax return   For more information about backup withholding and information reporting on foreign-source amounts or payments to foreign persons, see Regulations section 1. Free amended tax return 6049-5. Free amended tax return Information for Owners of OID Debt Instruments This section is for persons who prepare their own tax returns. Free amended tax return It discusses the income tax rules for figuring and reporting OID on long-term debt instruments. Free amended tax return It also includes a similar discussion for stripped bonds and coupons, such as zero coupon bonds available through the Department of the Treasury's STRIPS program and government-sponsored enterprises such as the Resolution Funding Corporation. Free amended tax return However, the information provided does not cover every situation. Free amended tax return More information can be found in the regulations under sections 1271 through 1275 of the Internal Revenue Code. Free amended tax return Including OID in income. Free amended tax return   Generally, you include OID in income as it accrues each year, whether or not you receive any payments from the debt instrument issuer. Free amended tax return Exceptions. Free amended tax return   The rules for including OID in income as it accrues generally do not apply to the following debt instruments. Free amended tax return U. Free amended tax return S. Free amended tax return savings bonds. Free amended tax return Tax-exempt obligations. Free amended tax return (However, see Tax-Exempt Bonds and Coupons, later. Free amended tax return ) Obligations issued by individuals before March 2, 1984. Free amended tax return Loans of $10,000 or less between individuals who are not in the business of lending money. Free amended tax return (The dollar limit includes outstanding prior loans by the lender to the borrower. Free amended tax return ) This exception does not apply if a principal purpose of the loan is to avoid any federal tax. Free amended tax return   See chapter 1 of Publication 550 for information about the rules for these and other types of discounted debt instruments, such as short-term and market discount obligations. Free amended tax return Publication 550 also discusses rules for holders of REMIC interests and CDOs. Free amended tax return De minimis rule. Free amended tax return   You can treat OID as zero if the total OID on a debt instrument is less than one-fourth of 1% (. Free amended tax return 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Free amended tax return Debt instruments with de minimis OID are not listed in this publication. Free amended tax return There are special rules to determine the de minimis amount in the case of debt instruments that provide for more than one payment of principal. Free amended tax return Also, the de minimis rules generally do not apply to tax-exempt obligations. Free amended tax return Example 2. Free amended tax return You bought at issuance a 10-year debt instrument with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Free amended tax return One-fourth of 1% of $1,000 (the stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. Free amended tax return Under the de minimis rule, you can treat the OID as zero because the $20 discount is less than $25. Free amended tax return Example 3. Free amended tax return Assume the same facts as Example 2, except the debt instrument was issued at $950. Free amended tax return You must report part of the $50 OID each year because it is more than $25. Free amended tax return Choice to report all interest as OID. Free amended tax return   Generally, you can choose to treat all interest on a debt instrument acquired after April 3, 1994, as OID and include it in gross income by using the constant yield method. Free amended tax return See Constant yield method under Debt Instruments Issued After 1984, later, for more information. Free amended tax return   For this choice, interest includes stated interest, acquisition discount, OID, de minimis OID, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition premium. Free amended tax return For more information, see Regulations section 1. Free amended tax return 1272-3. Free amended tax return Purchase after date of original issue. Free amended tax return   A debt instrument you purchased after the date of original issue may have premium, acquisition premium, or market discount. Free amended tax return If so, the OID reported to you on Form 1099-OID may have to be adjusted. Free amended tax return For more information, see Showing an OID adjustment under How To Report OID, later. Free amended tax return The following rules generally do not apply to contingent payment debt instruments. Free amended tax return Adjustment for premium. Free amended tax return   If your debt instrument (other than an inflation-indexed debt instrument) has premium, do not report any OID as ordinary income. Free amended tax return Your adjustment is the total OID shown on your Form 1099-OID. Free amended tax return Adjustment for acquisition premium. Free amended tax return   If your debt instrument has acquisition premium, reduce the OID you report. Free amended tax return Your adjustment is the difference between the OID shown on your Form 1099-OID and the reduced OID amount figured using the rules explained later under Figuring OID on Long-Term Debt Instruments. Free amended tax return Adjustment for market discount. Free amended tax return   If your debt instrument has market discount that you choose to include in income currently, increase the OID you report. Free amended tax return Your adjustment is the accrued market discount for the year. Free amended tax return See Market Discount Bonds in chapter 1 of Publication 550 for information on how to figure accrued market discount and include it in your income currently and for other information about market discount bonds. Free amended tax return If you choose to use the constant yield method to figure accrued market discount, also see Figuring OID on Long-Term Debt Instruments, later. Free amended tax return The constant yield method of figuring accrued OID, explained in those discussions under Constant yield method, is also used to figure accrued market discount. Free amended tax return For more information concerning premium or market discount on an inflation-indexed debt instrument, see Regulations section 1. Free amended tax return 1275-7. Free amended tax return Sale, exchange, or redemption. Free amended tax return   Generally, you treat your gain or loss from the sale, exchange, or redemption of a discounted debt instrument as a capital gain or loss if you held the debt instrument as a capital asset. Free amended tax return If you sold the debt instrument through a broker, you should receive Form 1099-B or an equivalent statement from the broker. Free amended tax return Use the Form 1099-B or other statement and your brokerage statements to complete Form 8949, and Schedule D (Form 1040). Free amended tax return   Your gain or loss is the difference between the amount you realized on the sale, exchange, or redemption and your basis in the debt instrument. Free amended tax return Your basis, generally, is your cost increased by the OID you have included in income each year you held it. Free amended tax return In general, to determine your gain or loss on a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. Free amended tax return   See chapter 4 of Publication 550 for more information about the tax treatment of the sale or redemption of discounted debt instruments. Free amended tax return Example 4. Free amended tax return Larry, a calendar year taxpayer, bought a corporate debt instrument at original issue for $86,235. Free amended tax return 00 on November 1 of Year 1. Free amended tax return The 15-year debt instrument matures on October 31 of Year 16 at a stated redemption price of $100,000. Free amended tax return The debt instrument provides for semiannual payments of interest at 10%. Free amended tax return Assume the debt instrument is a capital asset in Larry's hands. Free amended tax return The debt instrument has $13,765. Free amended tax return 00 of OID ($100,000 stated redemption price at maturity minus $86,235. Free amended tax return 00 issue price). Free amended tax return Larry sold the debt instrument for $90,000 on November 1 of Year 4. Free amended tax return Including the OID he will report for the period he held the debt instrument in Year 4, Larry has included $4,556. Free amended tax return 00 of OID in income and has increased his basis by that amount to $90,791. Free amended tax return 00. Free amended tax return Larry has realized a loss of $791. Free amended tax return 00. Free amended tax return All of Larry's loss is capital loss. Free amended tax return Form 1099-OID The issuer of the debt instrument (or your broker, if you purchased or held the debt instrument through a broker) should give you a copy of Form 1099-OID or a similar statement if the accrued OID for the calendar year is $10 or more and the term of the debt instrument is more than 1 year. Free amended tax return Form 1099-OID shows all OID income in box 1 except OID on a U. Free amended tax return S. Free amended tax return Treasury obligation, which is shown in box 8. Free amended tax return It also shows, in box 2, any qualified stated interest you must include in income. Free amended tax return (However, any qualified stated interest on Treasury inflation-protected securities can be reported on Form 1099-INT in box 3. Free amended tax return ) A copy of Form 1099-OID will be sent to the IRS. Free amended tax return Do not attach your copy to your tax return. Free amended tax return Keep it for your records. Free amended tax return If you are required to file a tax return and you receive Form 1099-OID showing taxable amounts, you must report these amounts on your return. Free amended tax return A 20% accuracy-related penalty may be charged for underpayment of tax due to either negligence or disregard of rules and regulations or substantial understatement of tax. Free amended tax return Form 1099-OID not received. Free amended tax return   If you held an OID debt instrument for a calendar year but did not receive a Form 1099-OID, refer to the discussions under Figuring OID on Long-Term Debt Instruments, later, for information on the OID you must report. Free amended tax return Refiguring OID. Free amended tax return   You must refigure the OID shown on Form 1099-OID, in box 1 or box 8, to determine the proper amount to include in income if one of the following applies. Free amended tax return You bought the debt instrument at a premium or at an acquisition premium. Free amended tax return The debt instrument is a stripped bond or coupon (including zero coupon bonds backed by U. Free amended tax return S. Free amended tax return Treasury securities). Free amended tax return The debt instrument is a contingent payment or inflation-indexed debt instrument. Free amended tax return See the discussions under Figuring OID on Long-Term Debt Instruments or Figuring OID on Stripped Bonds and Coupons, later, for the specific computations. Free amended tax return Refiguring interest. Free amended tax return   If you disposed of a debt instrument or acquired it from another holder between interest dates, see the discussion under Bonds Sold Between Interest Dates in chapter 1 of Publication 550 for information about refiguring the interest shown on Form 1099-OID in box 2. Free amended tax return Nominee. Free amended tax return   If you are the holder of an OID debt instrument and you receive a Form 1099-OID that shows your taxpayer identification number and includes amounts belonging to another person, you are considered a “nominee. Free amended tax return ” You must file another Form 1099-OID for each actual owner, showing the OID for the owner. Free amended tax return Show the owner of the debt instrument as the “recipient” and you as the “payer. Free amended tax return ”   Complete Form 1099-OID and Form 1096 and file the forms with the Internal Revenue Service Center for your area. Free amended tax return You must also give a copy of the Form 1099-OID to the actual owner. Free amended tax return However, you are not required to file a nominee return to show amounts belonging to your spouse. Free amended tax return See the Form 1099 instructions for more information. Free amended tax return   When preparing your tax return, follow the instructions under Showing an OID adjustment in the next discussion. Free amended tax return How To Report OID Generally, you report your taxable interest and OID income on the interest line of Form 1040EZ, Form 1040A, or Form 1040. Free amended tax return Form 1040 or Form 1040A required. Free amended tax return   You must use Form 1040 or Form 1040A (you cannot use Form 1040EZ) under either of the following conditions. Free amended tax return You received a Form 1099-OID as a nominee for the actual owner. Free amended tax return Your total interest and OID income for the year was more than $1,500. Free amended tax return Form 1040 required. Free amended tax return   You must use Form 1040 (you cannot use Form 1040A or Form 1040EZ) if you are reporting more or less OID than the amount shown on Form 1099-OID, other than because you are a nominee. Free amended tax return For example, if you paid a premium or an acquisition premium when you purchased the debt instrument, you must use Form 1040 because you will report less OID than shown on Form 1099-OID. Free amended tax return Also, you must use Form 1040 if you were charged an early withdrawal penalty. Free amended tax return Where to report. Free amended tax return   List each payer's name (if a brokerage firm gave you a Form 1099, list the brokerage firm as the payer) and the amount received from each payer on Form 1040A, Schedule B, Part I, line 1, or Form 1040, Schedule B, line 1. Free amended tax return Include all OID and periodic interest shown on any Form 1099-OID, boxes 1, 2, and 8, you received for the tax year. Free amended tax return Also include any other OID and interest income for which you did not receive a Form 1099. Free amended tax return Showing an OID adjustment. Free amended tax return   If you use Form 1040 to report more or less OID than shown on Form 1099-OID, list the full OID on Schedule B, Part I, line 1, and follow the instructions under 1 or 2, next. Free amended tax return   If you use Form 1040A to report the OID shown on a Form 1099-OID you received as a nominee for the actual owner, list the full OID on Schedule B, Part I, line 1 and follow the instructions under 1. Free amended tax return If the OID, as adjusted, is less than the amount shown on Form 1099-OID, show the adjustment as follows. Free amended tax return Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Free amended tax return Below the subtotal, write “Nominee Distribution” or “OID Adjustment” and show the OID you are not required to report. Free amended tax return Subtract that OID from the subtotal and enter the result on line 2. Free amended tax return If the OID, as adjusted, is more than the amount shown on Form 1099-OID, show the adjustment as follows. Free amended tax return Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Free amended tax return Below the subtotal, write “OID Adjustment” and show the additional OID. Free amended tax return Add that OID to the subtotal and enter the result on line 2. Free amended tax return Figuring OID on Long-Term Debt Instruments How you figure the OID on a long-term debt instrument depends on the date it was issued. Free amended tax return It also may depend on the type of the debt instrument. Free amended tax return There are different rules for each of the following debt instruments. Free amended tax return Corporate debt instruments issued after 1954 and before May 28, 1969, and government debt instruments issued after 1954 and before July 2, 1982. Free amended tax return Corporate debt instruments issued after May 27, 1969, and before July 2, 1982. Free amended tax return Debt instruments issued after July 1, 1982, and before 1985. Free amended tax return Debt instruments issued after 1984 (other than debt instruments described in (5) and (6)). Free amended tax return Contingent payment debt instruments issued after August 12, 1996. Free amended tax return Inflation-indexed debt instruments (including Treasury inflation-protected securities) issued after January 5, 1997. Free amended tax return Zero coupon bonds. Free amended tax return   The rules for figuring OID on zero coupon bonds backed by U. Free amended tax return S. Free amended tax return Treasury securities are discussed under Figuring OID on Stripped Bonds and Coupons, later. Free amended tax return Corporate Debt Instruments Issued After 1954 and Before May 28, 1969, and Government Debt Instruments Issued After 1954 and Before July 2, 1982 If you hold these debt instruments as capital assets, you include OID in income only in the year the debt instrument is sold, exchanged, or redeemed, and only if you have a gain. Free amended tax return The OID, which is taxed as ordinary income, generally equals the following amount. Free amended tax return   number of full months you held the debt instrument  number of full months from date of original issue to date of maturity X original issue discount The balance of the gain is capital gain. Free amended tax return If there is a loss on the sale of the debt instrument, the entire loss is a capital loss and no OID is reported. Free amended tax return Corporate Debt Instruments Issued After May 27, 1969, and Before July 2, 1982 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments. Free amended tax return For information about showing the correct OID on your tax return, see the discussion under How To Report OID, earlier. Free amended tax return Your basis in the debt instrument is increased by the OID you include in income. Free amended tax return Form 1099-OID. Free amended tax return   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Free amended tax return However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Free amended tax return See Reduction for acquisition premium, later. Free amended tax return If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. Free amended tax return irs. Free amended tax return gov/pub1212 by clicking the link under Recent Developments. Free amended tax return Form 1099-OID not received. Free amended tax return    The OID listed is for each $1,000 of redemption price. Free amended tax return You must adjust the listed amount if your debt instrument has a different principal amount. Free amended tax return For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Free amended tax return   If you held the debt instrument the entire year, use the OID shown in Section I-A for a calendar year. Free amended tax return (If your debt instrument is not listed in Section I-A, consult the issuer for information about the issue price and the OID that accrued for that year. Free amended tax return ) If you did not hold the debt instrument the entire year, figure your OID using the following method. Free amended tax return Divide the OID shown by 12. Free amended tax return Multiply the result in (1) by the number of complete and partial months (for example, 6½ months) you held the debt instrument during a calendar year. Free amended tax return This is the OID to include in income unless you paid an acquisition premium. Free amended tax return The reduction for acquisition premium is discussed next. Free amended tax return Reduction for acquisition premium. Free amended tax return   If you bought the debt instrument at an acquisition premium, figure the OID to include in income as follows. Free amended tax return Divide the total OID on the debt instrument by the number of complete months, and any part of a month, from the date of original issue to the maturity date. Free amended tax return This is the monthly OID. Free amended tax return Subtract from your cost the issue price and the accumulated OID from the date of issue to the date of purchase. Free amended tax return (If the result is zero or less, stop here. Free amended tax return You did not pay an acquisition premium. Free amended tax return ) Divide the amount figured in (2) by the number of complete months, and any part of a month, from the date of your purchase to the maturity date. Free amended tax return Subtract the amount figured in (3) from the amount figured in (1). Free amended tax return This is the OID to include in income for each month you hold the debt instrument during the year. Free amended tax return Transfers during the month. Free amended tax return   If you buy or sell a debt instrument on any day other than the same day of the month as the date of original issue, the ratable monthly portion of OID for the month of sale is divided between the seller and the buyer according to the number of days each held the debt instrument. Free amended tax return Your holding period for this purpose begins the day you acquire the debt instrument and ends the day before you dispose of it. Free amended tax return Debt Instruments Issued After July 1, 1982, and Before 1985 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments and increase your basis by the amount included. Free amended tax return For information about showing the correct OID on your tax return, see How To Report OID, earlier. Free amended tax return Form 1099-OID. Free amended tax return   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Free amended tax return However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Free amended tax return See Constant yield method and the discussions on acquisition premium that follow, later. Free amended tax return If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. Free amended tax return irs. Free amended tax return gov/pub1212 by clicking the link under Recent Developments. Free amended tax return Form 1099-OID not received. Free amended tax return    The OID listed is for each $1,000 of redemption price. Free amended tax return You must adjust the listed amount if your debt instrument has a different principal amount. Free amended tax return For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Free amended tax return   If you held the debt instrument the entire year, use the OID shown in Section I-A. Free amended tax return (If your instrument is not listed in Section I-A, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. Free amended tax return ) If you did not hold the debt instrument the entire year, figure your OID using either of the following methods. Free amended tax return Method 1. Free amended tax return    Divide the total OID for a calendar year by 365 (366 for leap years). Free amended tax return Multiply the result in (1) by the number of days you held the debt instrument during that particular year. Free amended tax return  This computation is an approximation and may result in a slightly higher OID than Method 2. Free amended tax return Method 2. Free amended tax return    Look up the daily OID for the first accrual period you held the debt instrument during a calendar year. Free amended tax return (See Accrual period under Constant yield method, next. Free amended tax return ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Free amended tax return If you held the debt instrument for part of both accrual periods, repeat (1) and (2) for the second accrual period. Free amended tax return Add the results of (2) and (3). Free amended tax return This is the OID to include in income, unless you paid an acquisition premium. Free amended tax return (The reduction for acquisition premium is discussed later. Free amended tax return ) Constant yield method. Free amended tax return   This discussion shows how to figure OID on debt instruments issued after July 1, 1982, and before 1985, using a constant yield method. Free amended tax return OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Free amended tax return   Figure the OID allocable to any accrual period as follows. Free amended tax return Multiply the adjusted issue price at the beginning of the accrual period by the debt instrument's yield to maturity. Free amended tax return Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Free amended tax return Accrual period. Free amended tax return   An accrual period for any OID debt instrument issued after July 1, 1982, and before 1985 is each 1-year period beginning on the date of the issue of the obligation and each anniversary thereafter, or the shorter period to maturity for the last accrual period. Free amended tax return Your tax year will usually include parts of two accrual periods. Free amended tax return Daily OID. Free amended tax return   The OID for any accrual period is allocated equally to each day in the accrual period. Free amended tax return You must include in income the sum of the OID amounts for each day you hold the debt instrument during the year. Free amended tax return If your tax year includes parts of two or more accrual periods, you must include the proper daily OID amounts for each accrual period. Free amended tax return Figuring daily OID. Free amended tax return   The daily OID for the initial accrual period is figured using the following formula. Free amended tax return   (ip × ytm) − qsi     p   ip = issue price ytm = yield to maturity qsi = qualified stated interest p = number of days in accrual period         The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. Free amended tax return Reduction for acquisition premium on debt instruments purchased before July 19, 1984. Free amended tax return   If you bought the debt instrument at an acquisition premium before July 19, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Free amended tax return Figure the daily acquisition premium by dividing the total acquisition premium by the number of days in the period beginning on your purchase date and ending on the day before the date of maturity. Free amended tax return Reduction for acquisition premium on debt instruments purchased after July 18, 1984. Free amended tax return   If you bought the debt instrument at an acquisition premium after July 18, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Free amended tax return However, the method of figuring the daily acquisition premium is different from the method described in the preceding discussion. Free amended tax return To figure the daily acquisition premium under this method, multiply the daily OID by the following fraction. Free amended tax return The numerator is the acquisition premium. Free amended tax return The denominator is the total OID remaining for the debt instrument after your purchase date. Free amended tax return Section I-A is available at www. Free amended tax return irs. Free amended tax return gov/pub1212 and clicking the link under Recent Developments. Free amended tax return Using Section I-A to figure accumulated OID. Free amended tax return   If you bought your corporate debt instrument in a calendar year or the subsequent year, you can figure the accumulated OID to the date of purchase by adding the following amounts. Free amended tax return The amount from the “Total OID to January 1, YYYY” column for your debt instrument. Free amended tax return The OID from January 1 of a calendar year to the date of purchase, figured as follows. Free amended tax return Multiply the daily OID for the first accrual period in the calendar year by the number of days from January 1 to the date of purchase, or the end of the accrual period if the debt instrument was purchased in the second or third accrual period. Free amended tax return Multiply the daily OID for each subsequent accrual period by the number of days in the period to the date of purchase or the end of the accrual period, whichever applies. Free amended tax return Add the amounts figured in (2a) and (2b). Free amended tax return Debt Instruments Issued After 1984 If you hold debt instruments issued after 1984, you must report part of the OID in gross income each year that you own the debt instruments. Free amended tax return You must include the OID in gross income whether or not you hold the debt instrument as a capital asset. Free amended tax return Your basis in the debt instrument is increased by the OID you include in income. Free amended tax return For information about showing the correct OID on your tax return, see How To Report OID, earlier. Free amended tax return Form 1099-OID. Free amended tax return   You should receive a Form 1099-OID showing OID for the part of a calendar year you held the debt instrument. Free amended tax return However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Free amended tax return See Constant yield method and Reduction for acquisition premium, later. Free amended tax return   You may also need to refigure the OID for a contingent payment or inflation-indexed debt instrument on which the amount reported on Form 1099-OID is inaccurate. Free amended tax return See Contingent Payment Debt Instruments or Inflation-Indexed Debt Instruments, later. Free amended tax return If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-B available at www. Free amended tax return irs. Free amended tax return gov/pub1212 by clicking the link under Recent Developments. Free amended tax return Form 1099-OID not received. Free amended tax return   The OID listed is for each $1,000 of redemption price. Free amended tax return You must adjust the listed amount if your debt instrument has a different principal amount. Free amended tax return For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Free amended tax return   Use the OID shown in Section I-B for a calendar year if you held the debt instrument the entire year. Free amended tax return (If your debt instrument is not listed in Section I-B, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. Free amended tax return ) If you did not hold the debt instrument the entire year, figure your OID as follows. Free amended tax return Look up the daily OID for the first accrual period in which you held the debt instrument during a calendar year. Free amended tax return (See Accrual period under Constant yield method, later. Free amended tax return ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Free amended tax return Repeat (1) and (2) for any remaining accrual periods in which you held the debt instrument. Free amended tax return Add the results of (2) and (3). Free amended tax return This is the OID to include in income for that year, unless you paid an acquisition premium. Free amended tax return (The reduction for acquisition premium is discussed later. Free amended tax return ) Tax-exempt bond. Free amended tax return   If you own a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. Free amended tax return You need to make this adjustment to determine if you have a gain or loss on a later disposition of the bond. Free amended tax return In general, use the rules that follow to determine your OID. Free amended tax return Constant yield method. Free amended tax return   This discussion shows how to figure OID on debt instruments issued after 1984 using a constant yield method. Free amended tax return (The special rules that apply to contingent payment debt instruments and inflation-indexed debt instruments are explained later. Free amended tax return ) OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Free amended tax return   Figure the OID allocable to any accrual period as follows. Free amended tax return Multiply the adjusted issue price at the beginning of the accrual period by a fraction. Free amended tax return The numerator of the fraction is the debt instrument's yield to maturity and the denominator is the number of accrual periods per year. Free amended tax return The yield must be stated appropriately taking into account the length of the particular accrual period. Free amended tax return Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Free amended tax return Accrual period. Free amended tax return   For debt instruments issued after 1984 and before April 4, 1994, an accrual period is each 6-month period that ends on the day that corresponds to the stated maturity date of the debt instrument or the date 6 months before that date. Free amended tax return For example, a debt instrument maturing on March 31 has accrual periods that end on September 30 and March 31 of each calendar year. Free amended tax return Any short period is included as the first accrual period. Free amended tax return   For debt instruments issued after April 3, 1994, accrual periods may be of any length and may vary in length over the term of the debt instrument, as long as each accrual period is no longer than 1 year and all payments are made on the first or last day of an accrual period. Free amended tax return However, the OID listed for these debt instruments in Section I-B has been figured using 6-month accrual periods. Free amended tax return Daily OID. Free amended tax return   The OID for any accrual period is allocated equally to each day in the accrual period. Free amended tax return Figure the amount to include in income by adding the OID for each day you hold the debt instrument during the year. Free amended tax return Since your tax year will usually include parts of two or more accrual periods, you must include the proper daily OID for each accrual period. Free amended tax return If your debt instrument has 6-month accrual periods, your tax year will usually include one full 6-month accrual period and parts of two other 6-month periods. Free amended tax return Figuring daily OID. Free amended tax return   The daily OID for the initial accrual period is figured using the following formula. Free amended tax return   (ip × ytm/n) − qsi     p   ip = issue price ytm = yield to maturity n = number of accrual periods in 1 year qsi = qualified stated interest p = number of days in accrual period       The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. Free amended tax return Example 5. Free amended tax return On January 1 of Year 1, you bought a 15-year, 10% debt instrument of A Corporation at original issue for $86,235. Free amended tax return 17. Free amended tax return According to the prospectus, the debt instrument matures on December 31 of Year 15 at a stated redemption price of $100,000. Free amended tax return The yield to maturity is 12%, compounded semiannually. Free amended tax return The debt instrument provides for qualified stated interest payments of $5,000 on June 30 and December 31 of each calendar year. Free amended tax return The accrual periods are the 6-month periods ending on each of these dates. Free amended tax return The number of days for the first accrual period (January 1 through June 30) is 181 days (182 for leap years). Free amended tax return The daily OID for the first accrual period is figured as follows. Free amended tax return   ($86,235. Free amended tax return 17 x . Free amended tax return 12/2) – $5,000     181 days     = $174. Free amended tax return 11020 = $. Free amended tax return 96193   181           The adjusted issue price at the beginning of the second accrual period is the issue price plus the OID previously includible in income ($86,235. Free amended tax return 17 + $174. Free amended tax return 11), or $86,409. Free amended tax return 28. Free amended tax return The number of days for the second accrual period (July 1 through December 31) is 184 days. Free amended tax return The daily OID for the second accrual period is figured as follows. Free amended tax return   ($86,409. Free amended tax return 28 x . Free amended tax return 12/2) – $5,000     184 days     = $184. Free amended tax return 55681 = $1. Free amended tax return 00303   184 Since the first and second accrual periods coincide exactly with your tax year, you include in income for Year 1 the OID allocable to the first two accrual periods, $174. Free amended tax return 11 ($. Free amended tax return 95665 × 182 days) plus $184. Free amended tax return 56 ($1. Free amended tax return 00303 × 184 days), or $358. Free amended tax return 67. Free amended tax return Add the OID to the $10,000 interest you report on your income tax return for Year 1. Free amended tax return Example 6. Free amended tax return Assume the same facts as in Example 5, except that you bought the debt instrument at original issue on May 1 of Year 1, with a maturity date of April 30, Year 16. Free amended tax return Also, the interest payment dates are October 31 and April 30 of each calendar year. Free amended tax return The accrual periods are the 6-month periods ending on each of these dates. Free amended tax return The number of days for the first accrual period (May 1 through October 31) is 184 days. Free amended tax return The daily OID for the first accrual period is figured as follows. Free amended tax return   ($86,235. Free amended tax return 17 x . Free amended tax return 12/2) – $5,000     184 days     = $174. Free amended tax return 11020 = $. Free amended tax return 94625   184           The number of days for the second accrual period (November 1 through April 30) is 181 days (182 for leap years). Free amended tax return The daily OID for the second accrual period is figured as follows. Free amended tax return   ($86,409. Free amended tax return 28 x . Free amended tax return 12/2) – $5,000     181 days     = $184. Free amended tax return 55681 = $1. Free amended tax return 01965   181 If you hold the debt instrument through the end of Year 1, you must include $236. Free amended tax return 31 of OID in income. Free amended tax return This is $174. Free amended tax return 11 ($. Free amended tax return 94625 × 184 days) for the period May 1 through October 31 plus $62. Free amended tax return 20 ($1. Free amended tax return 01965 × 61 days) for the period November 1 through December 31. Free amended tax return The OID is added to the $5,000 interest income paid on October 31 of Year 1. Free amended tax return Your basis in the debt instrument is increased by the OID you include in income. Free amended tax return On January 1 of Year 2, your basis in the A Corporation debt instrument is $86,471. Free amended tax return 48 ($86,235. Free amended tax return 17 + $236. Free amended tax return 31). Free amended tax return Short first accrual period. Free amended tax return   You may have to make adjustments if a debt instrument has a short first accrual period. Free amended tax return For example, a debt instrument with 6-month accrual periods that is issued on February 15 and matures on October 31 has a short first accrual period that ends April 30. Free amended tax return (The remaining accrual periods begin on May 1 and November 1. Free amended tax return ) For this short period, figure the daily OID as described earlier, but adjust the yield for the length of the short accrual period. Free amended tax return You may use any reasonable compounding method in determining OID for a short period. Free amended tax return Examples of reasonable compounding methods include continuous compounding and monthly compounding (that is, simple interest within a month). Free amended tax return Consult your tax advisor for more information about making this computation. Free amended tax return   The OID for the final accrual period is the difference between the amount payable at maturity (other than a payment of qualified stated interest) and the adjusted issue price at the beginning of the final accrual period. Free amended tax return Reduction for acquisition premium. Free amended tax return   If you bought the debt instrument at an acquisition premium, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Free amended tax return To figure the daily acquisition premium, multiply the daily OID by the following fraction. Free amended tax return The numerator is the acquisition premium. Free amended tax return The denominator is the total OID remaining for the debt instrument after your purchase date. Free amended tax return Example 7. Free amended tax return Assume the same facts as in Example 6, except that you bought the debt instrument on November 1 of Year 1 for $87,000, after its original issue on May 1 of Year 1. Free amended tax return The adjusted issue price on November 1 of Year 1 is $86,409. Free amended tax return 28 ($86,235. Free amended tax return 17 + $174. Free amended tax return 11). Free amended tax return In this case, you paid an acquisition premium of $590. Free amended tax return 72 ($87,000 − $86,409. Free amended tax return 28). Free amended tax return The daily OID for the accrual period November 1 through April 30, reduced for the acquisition premium, is figured as follows. Free amended tax return 1) Daily OID on date of purchase (2nd accrual period) $1. Free amended tax return 01965*  2)  Acquisition premium $590. Free amended tax return 72    3)  Total OID remaining after purchase date ($13,764. Free amended tax return 83 − $174. Free amended tax return 11) 13,590. Free amended tax return 72   4) Line 2 ÷ line 3 . Free amended tax return 04346  5)  Line 1 × line 4 . Free amended tax return 04432  6)  Daily OID reduced for the acquisition premium. Free amended tax return Line 1 − line 5 $0. Free amended tax return 97533  * As shown in Example 6. Free amended tax return The total OID to include in income for Year 1 is $59. Free amended tax return 50 ($. Free amended tax return 97533 × 61 days). Free amended tax return Contingent Payment Debt Instruments This discussion shows how to figure OID on a contingent payment debt instrument issued after August 12, 1996, that was issued for cash or publicly traded property. Free amended tax return In general, a contingent payment debt instrument provides for one or more payments that are contingent as to timing or amount. Free amended tax return If you hold a contingent payment bond, you must report OID as it accrues each year. Free amended tax return Because the actual payments on a contingent payment debt instrument cannot be known in advance, issuers and holders cannot use the constant yield method (discussed earlier under Debt Instruments Issued After 1984) without making certain assumptions about the payments on the debt instrument. Free amended tax return To figure OID accruals on contingent payment debt instruments, holders and issuers must use the noncontingent bond method. Free amended tax return Noncontingent bond method. Free amended tax return    Under this method, the issuer must compute a comparable yield for the debt instrument and, based on this yield, construct a projected payment schedule for the instrument, which includes a projected fixed amount for each contingent payment. Free amended tax return In general, holders and issuers accrue OID on this projected payment schedule using the constant yield method that applies to fixed payment debt instruments. Free amended tax return When a contingent payment differs from the projected fixed amount, the holders and issuers make adjustments to their OID accruals. Free amended tax return If the actual contingent payment is larger than expected, both the issuer and the holder increase their OID accruals. Free amended tax return If the actual contingent payment is smaller than expected, holders and issuers generally decrease their OID accruals. Free amended tax return Form 1099-OID. Free amended tax return   The amount shown on Form 1099-OID in box 1 you receive for a contingent payment debt instrument may not be the correct amount to include in income. Free amended tax return For example, the amount may not be correct if the contingent payment was different from the projected amount. Free amended tax return If the amount in box 1 is not correct, you must figure the OID to report on your return under the following rules. Free amended tax return For information on showing an OID adjustment on your tax return, see How To Report OID, earlier. Free amended tax return Figuring OID. Free amended tax return   To figure OID on a contingent payment debt instrument, you need to know the “comparable yield” and “projected payment schedule” of the debt instrument. Free amended tax return The issuer must make these available to you. Free amended tax return Comparable yield. Free amended tax return   The comparable yield generally is the yield at which the issuer would issue a fixed rate debt instrument with terms and conditions similar to those of the contingent payment debt instrument. Free amended tax return The comparable yield is determined as of the debt instrument's issue date. Free amended tax return Projected payment schedule. Free amended tax return   The projected payment schedule for a contingent payment debt instrument includes all fixed payments due under the instrument and a projected fixed amount for each contingent payment. Free amended tax return The projected payment schedule is created by the issuer as of the debt instrument's issue date. Free amended tax return It is used to determine the issuer's and holder's interest accruals and adjustments. Free amended tax return Steps for figuring OID. Free amended tax return   Figure the OID on a contingent payment debt instrument in two steps. Free amended tax return Figure the OID using the constant yield method (discussed earlier under Debt Instruments Issued After 1984 ) that applies to fixed payment debt instruments. Free amended tax return Use the comparable yield as the yield to maturity. Free amended tax return In general, use the projected payment schedule to determine the instrument's adjusted issue price at the beginning of each accrual period (other than the initial period). Free amended tax return Do not treat any amount payable as qualified stated interest. Free amended tax return Adjust the OID in (1) to account for actual contingent payments. Free amended tax return If the contingent payment is greater than the projected fixed amount, you have a positive adjustment. Free amended tax return If the contingent payment is less than the projected fixed amount, you have a negative adjustment. Free amended tax return Net positive adjustment. Free amended tax return   A net positive adjustment exists for a tax year when the total of any positive adjustments described in (2) above for the tax year is more than the total of any negative adjustments for the tax year. Free amended tax return Treat a net positive adjustment as additional OID for the tax year. Free amended tax return Net negative adjustment. Free amended tax return   A net negative adjustment exists for a tax year when the total of any negative adjustments described in (2) above for the tax year is more than the total of any positive adjustments for the tax year. Free amended tax return Use a net negative adjustment to offset OID on the debt instrument for the tax year. Free amended tax return If the net negative adjustment is more than the OID on the debt instrument for the tax year, you can claim the difference as an ordinary loss. Free amended tax return However, the amount you can claim as an ordinary loss is limited to the OID on the debt instrument you included in income in prior tax years. Free amended tax return You must carry forward any net negative adjustment that is more than the total OID for the tax year and prior tax years and treat it as a negative adjustment in the next tax year. Free amended tax return Basis adjustments. Free amended tax return   In general, increase your basis in a contingent payment debt instrument by the OID included in income. Free amended tax return Your basis, however, is not affected by any negative or positive adjustments. Free amended tax return Decrease your basis by any noncontingent payment received and the projected contingent payment scheduled to be received. Free amended tax return Treatment of gain or loss on sale or exchange. Free amended tax return   If you sell a contingent payment debt instrument at a gain, your gain is ordinary income (interest income), even if you hold the debt instrument as a capital asset. Free amended tax return If you sell a contingent payment debt instrument at a loss, your loss is an ordinary loss to the extent of your prior OID accruals on the debt instrument. Free amended tax return If the debt instrument is a capital asset, treat any loss that is more than your prior OID accruals as a capital loss. Free amended tax return See Regulations section 1. Free amended tax return 1275-4 for exceptions to these rules. Free amended tax return Premium, acquisition premium, and market discount. Free amended tax return   The rules for accruing premium, acquisition premium, and market discount do not apply to a contingent payment debt instrument. Free amended tax return See Regulations section 1. Free amended tax return 1275-4 to determine how to account for these items. Free amended tax return Inflation-Indexed Debt Instruments This discussion shows how you figure OID on certain inflation-indexed debt instruments issued after January 5, 1997. Free amended tax return An inflation-indexed debt instrument is generally a debt instrument on which the payments are adjusted for inflation and d
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The Free Amended Tax Return

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