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Free Efile For State And Federal

Free efile for state and federal 11. Free efile for state and federal   Casualties, Thefts, and Condemnations Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Casualties and TheftsDeductible losses. Free efile for state and federal Nondeductible losses. Free efile for state and federal Family pet. Free efile for state and federal Progressive deterioration. Free efile for state and federal Decline in market value of stock. Free efile for state and federal Mislaid or lost property. Free efile for state and federal Farming Losses How To Figure a Loss Deduction Limits on Losses of Personal-Use Property When Loss Is Deductible Proof of Loss Figuring a Gain Other Involuntary ConversionsCondemnation Irrigation Project Livestock Losses Tree Seedlings Postponing GainException. Free efile for state and federal Related persons. Free efile for state and federal Replacement Property Replacement Period How To Postpone Gain Disaster Area LossesWho is eligible. Free efile for state and federal Covered disaster area. Free efile for state and federal Reporting Gains and Losses Introduction This chapter explains the tax treatment of casualties, thefts, and condemnations. Free efile for state and federal A casualty occurs when property is damaged, destroyed, or lost due to a sudden, unexpected, or unusual event. Free efile for state and federal A theft occurs when property is stolen. Free efile for state and federal A condemnation occurs when private property is legally taken for public use without the owner's consent. Free efile for state and federal A casualty, theft, or condemnation may result in a deductible loss or taxable gain on your federal income tax return. Free efile for state and federal You may have a deductible loss or a taxable gain even if only a portion of your property was affected by a casualty, theft, or condemnation. Free efile for state and federal An involuntary conversion occurs when you receive money or other property as reimbursement for a casualty, theft, condemnation, disposition of property under threat of condemnation, or certain other events discussed in this chapter. Free efile for state and federal If an involuntary conversion results in a gain and you buy qualified replacement property within the specified replacement period, you can postpone reporting the gain on your income tax return. Free efile for state and federal For more information, see Postponing Gain , later. Free efile for state and federal Topics - This chapter discusses: Casualties and thefts How to figure a loss or gain Other involuntary conversions Postponing gain Disaster area losses Reporting gains and losses Drought involving property connected with a trade or business or a transaction entered into for profit Useful Items - You may want to see: Publication 523 Selling Your Home 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 544 Sales and Other Dispositions of Assets 547 Casualties, Disasters, and Thefts 584 Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property) 584-B Business Casualty, Disaster, and Theft Loss Workbook Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch D (Form 1040) Capital Gains and Losses Sch F (Form 1040) Profit or Loss From Farming 4684 Casualties and Thefts 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Free efile for state and federal Casualties and Thefts If your property is destroyed, damaged, or stolen, you may have a deductible loss. Free efile for state and federal If the insurance or other reimbursement is more than the adjusted basis of the destroyed, damaged, or stolen property, you may have a taxable gain. Free efile for state and federal Casualty. Free efile for state and federal   A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Free efile for state and federal A sudden event is one that is swift, not gradual or progressive. Free efile for state and federal An unexpected event is one that is ordinarily unanticipated and unintended. Free efile for state and federal 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 efile for state and federal Deductible losses. Free efile for state and federal   Deductible casualty losses can result from a number of different causes, including the following. Free efile for state and federal Airplane crashes. Free efile for state and federal Car, truck, or farm equipment accidents not resulting from your willful act or willful negligence. Free efile for state and federal Earthquakes. Free efile for state and federal Fires (but see Nondeductible losses next for exceptions). Free efile for state and federal Floods. Free efile for state and federal Freezing. Free efile for state and federal 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 efile for state and federal Lightning. Free efile for state and federal Storms, including hurricanes and tornadoes. Free efile for state and federal Terrorist attacks. Free efile for state and federal Vandalism. Free efile for state and federal Volcanic eruptions. Free efile for state and federal Nondeductible losses. Free efile for state and federal   A casualty loss is not deductible if the damage or destruction is caused by the following. Free efile for state and federal Accidentally breaking articles such as glassware or china under normal conditions. Free efile for state and federal A family pet (explained below). Free efile for state and federal A fire if you willfully set it, or pay someone else to set it. Free efile for state and federal A car, truck, or farm equipment accident if your willful negligence or willful act caused it. Free efile for state and federal The same is true if the willful act or willful negligence of someone acting for you caused the accident. Free efile for state and federal Progressive deterioration (explained below). Free efile for state and federal Family pet. Free efile for state and federal   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed above under Casualty are met. Free efile for state and federal Example. Free efile for state and federal You keep your horse in your yard. Free efile for state and federal The ornamental fruit trees in your yard were damaged when your horse stripped the bark from them. Free efile for state and federal Some of the trees were completely girdled and died. Free efile for state and federal Because the damage was not unexpected or unusual, the loss is not deductible. Free efile for state and federal Progressive deterioration. Free efile for state and federal   Loss of property due to progressive deterioration is not deductible as a casualty loss. Free efile for state and federal This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Free efile for state and federal Examples of damage due to progressive deterioration include damage from rust, corrosion, or termites. Free efile for state and federal However, weather-related conditions or disease may cause another type of involuntary conversion. Free efile for state and federal See Other Involuntary Conversions , later. Free efile for state and federal Theft. Free efile for state and federal   A theft is the taking and removing of money or property with the intent to deprive the owner of it. Free efile for state and federal The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent. Free efile for state and federal You do not need to show a conviction for theft. Free efile for state and federal   Theft includes the taking of money or property by the following means: Blackmail, Burglary, Embezzlement, Extortion, Kidnapping for ransom, Larceny, Robbery, or Threats. Free efile for state and federal The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Free efile for state and federal Decline in market value of stock. Free efile for state and federal   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 efile for state and federal 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 efile for state and federal You report a capital loss on Schedule D (Form 1040). Free efile for state and federal For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Free efile for state and federal Mislaid or lost property. Free efile for state and federal   The simple disappearance of money or property is not a theft. Free efile for state and federal 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 efile for state and federal Example. Free efile for state and federal A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Free efile for state and federal The diamond falls from the ring and is never found. Free efile for state and federal The loss of the diamond is a casualty. Free efile for state and federal Farming Losses You can deduct certain casualty or theft losses that occur in the business of farming. Free efile for state and federal The following is a discussion of some losses you can deduct and some you cannot deduct. Free efile for state and federal Livestock or produce bought for resale. Free efile for state and federal   Casualty or theft losses of livestock or produce bought for resale are deductible if you report your income on the cash method. Free efile for state and federal If you report your income on an accrual method, take casualty and theft losses on property bought for resale by omitting the item from the closing inventory for the year of the loss. Free efile for state and federal You cannot take a separate deduction. Free efile for state and federal Livestock, plants, produce, and crops raised for sale. Free efile for state and federal   Losses of livestock, plants, produce, and crops raised for sale are generally not deductible if you report your income on the cash method. Free efile for state and federal You have already deducted the cost of raising these items as farm expenses, so their basis is equal to zero. Free efile for state and federal   For plants with a preproductive period of more than 2 years, you may have a deductible loss if you have a tax basis in the plants. Free efile for state and federal You usually have a tax basis if you capitalized the expenses associated with these plants under the uniform capitalization rules. Free efile for state and federal The uniform capitalization rules are discussed in chapter 6. Free efile for state and federal   If you report your income on an accrual method, casualty or theft losses are deductible only if you included the items in your inventory at the beginning of your tax year. Free efile for state and federal You get the deduction by omitting the item from your inventory at the close of your tax year. Free efile for state and federal You cannot take a separate casualty or theft deduction. Free efile for state and federal Income loss. Free efile for state and federal   A loss of future income is not deductible. Free efile for state and federal Example. Free efile for state and federal A severe flood destroyed your crops. Free efile for state and federal Because you are a cash method taxpayer and already deducted the cost of raising the crops as farm expenses, this loss is not deductible, as explained above under Livestock, plants, produce, and crops raised for sale . Free efile for state and federal You estimate that the crop loss will reduce your farm income by $25,000. Free efile for state and federal This loss of future income is also not deductible. Free efile for state and federal Loss of timber. Free efile for state and federal   If you sell timber downed as a result of a casualty, treat the proceeds from the sale as a reimbursement. Free efile for state and federal If you use the proceeds to buy qualified replacement property, you can postpone reporting the gain. Free efile for state and federal See Postponing Gain , later. Free efile for state and federal Property used in farming. Free efile for state and federal   Casualty and theft losses of property used in your farm business usually result in deductible losses. Free efile for state and federal If a fire or storm destroyed your barn, or you lose by casualty or theft an animal you bought for draft, breeding, dairy, or sport, you may have a deductible loss. Free efile for state and federal See How To Figure a Loss , later. Free efile for state and federal Raised draft, breeding, dairy, or sporting animals. Free efile for state and federal   Generally, losses of raised draft, breeding, dairy, or sporting animals do not result in deductible casualty or theft losses because you have no basis in the animals. Free efile for state and federal However, you may have a basis in the animal and therefore may be able to claim a deduction if either of the following situations applies to you. Free efile for state and federal You use inventories to determine your income and you included the animals in your inventory. Free efile for state and federal You capitalized the expenses associated with the animals under the uniform capitalization rules and therefore have a tax basis in the animals subject to a casualty or theft. Free efile for state and federal When you include livestock in inventory, its last inventory value is its basis. Free efile for state and federal When you lose an inventoried animal held for draft, breeding, dairy, or sport by casualty or theft during the year, decrease ending inventory by the amount you included in inventory for the animal. Free efile for state and federal You cannot take a separate deduction. Free efile for state and federal How To Figure a Loss How you figure a deductible casualty or theft loss depends on whether the loss was to farm or personal-use property and whether the property was stolen or partly or completely destroyed. Free efile for state and federal Farm property. Free efile for state and federal   Farm property is the property you use in your farming business. Free efile for state and federal If your farm property was completely destroyed or stolen, your loss is figured as follows:      Your adjusted basis in the property     MINUS     Any salvage value     MINUS     Any insurance or other reimbursement you  receive or expect to receive      You can use the schedules in Publication 584-B to list your stolen, damaged, or destroyed business property and to figure your loss. Free efile for state and federal   If your farm property was partially damaged, use the steps shown under Personal-use property next to figure your casualty loss. Free efile for state and federal However, the deduction limits, discussed later, do not apply to farm property. Free efile for state and federal Personal-use property. Free efile for state and federal   Personal-use property is property used by you or your family members for personal purposes and not used in your farm business or for income-producing purposes. Free efile for state and federal The following items are examples of personal-use property: Your main home. Free efile for state and federal Furniture and electronics used in your main home and not used in a home office or for business purposes. Free efile for state and federal Clothing and jewelry. Free efile for state and federal An automobile used for nonbusiness purposes. Free efile for state and federal You figure the casualty or theft loss on this property by taking the following steps. Free efile for state and federal Determine your adjusted basis in the property before the casualty or theft. Free efile for state and federal Determine the decrease in fair market value of the property as a result of the casualty or theft. Free efile for state and federal From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you receive or expect to receive. Free efile for state and federal You must apply the deduction limits, discussed later, to determine your deductible loss. Free efile for state and federal    You can use Publication 584 to list your stolen or damaged personal-use property and figure your loss. Free efile for state and federal It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. Free efile for state and federal Adjusted basis. Free efile for state and federal   Adjusted basis is your basis (usually cost) increased or decreased by various events, such as improvements and casualty losses. Free efile for state and federal For more information about adjusted basis, see chapter 6. Free efile for state and federal Decrease in fair market value (FMV). Free efile for state and federal   The decrease in FMV is the difference between the property's value immediately before the casualty or theft and its value immediately afterward. Free efile for state and federal FMV is defined in chapter 10 under Payments Received or Considered Received . Free efile for state and federal Appraisal. Free efile for state and federal   To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. Free efile for state and federal But other measures, such as the cost of cleaning up or making repairs (discussed next) can be used to establish decreases in FMV. Free efile for state and federal   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 efile for state and federal The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Free efile for state and federal This information is needed to limit any deduction to the actual loss resulting from damage to the property. Free efile for state and federal Cost of cleaning up or making repairs. Free efile for state and federal   The cost of cleaning up after a casualty is not part of a casualty loss. Free efile for state and federal Neither is the cost of repairing damaged property after a casualty. Free efile for state and federal 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 efile for state and federal The repairs are actually made. Free efile for state and federal The repairs are necessary to bring the property back to its condition before the casualty. Free efile for state and federal The amount spent for repairs is not excessive. Free efile for state and federal The repairs fix the damage only. Free efile for state and federal 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 efile for state and federal Related expenses. Free efile for state and federal   The incidental expenses due to a casualty or theft, such as expenses for the treatment of personal injuries, temporary housing, or a rental car, are not part of your casualty or theft loss. Free efile for state and federal However, they may be deductible as farm business expenses if the damaged or stolen property is farm property. Free efile for state and federal Separate computations for more than one item of property. Free efile for state and federal   Generally, if a single casualty or theft involves more than one item of property, you must figure your loss separately for each item of property. Free efile for state and federal Then combine the losses to determine your total loss. Free efile for state and federal    There is an exception to this rule for personal-use real property. Free efile for state and federal See Exception for personal-use real property, later. Free efile for state and federal Example. Free efile for state and federal A fire on your farm damaged a tractor and the barn in which it was stored. Free efile for state and federal The tractor had an adjusted basis of $3,300. Free efile for state and federal Its FMV was $28,000 just before the fire and $10,000 immediately afterward. Free efile for state and federal The barn had an adjusted basis of $28,000. Free efile for state and federal Its FMV was $55,000 just before the fire and $25,000 immediately afterward. Free efile for state and federal You received insurance reimbursements of $2,100 on the tractor and $26,000 on the barn. Free efile for state and federal Figure your deductible casualty loss separately for the two items of property. Free efile for state and federal     Tractor Barn 1) Adjusted basis $3,300 $28,000 2) FMV before fire $28,000 $55,000 3) FMV after fire 10,000 25,000 4) Decrease in FMV  (line 2 − line 3) $18,000 $30,000 5) Loss (lesser of line 1 or line 4) $3,300 $28,000 6) Minus: Insurance 2,100 26,000 7) Deductible casualty loss $1,200 $2,000 8) Total deductible casualty loss $3,200 Exception for personal-use real property. Free efile for state and federal   In figuring a casualty loss on personal-use real property, the entire property (including any improvements, such as buildings, trees, and shrubs) is treated as one item. Free efile for state and federal Figure the loss using the smaller of the following. Free efile for state and federal The decrease in FMV of the entire property. Free efile for state and federal The adjusted basis of the entire property. Free efile for state and federal Example. Free efile for state and federal You bought a farm in 1990 for $160,000. Free efile for state and federal The adjusted basis of the residential part is now $128,000. Free efile for state and federal In 2013, a windstorm blew down shade trees and three ornamental trees planted at a cost of $7,500 on the residential part. Free efile for state and federal The adjusted basis of the residential part includes the $7,500. Free efile for state and federal The fair market value (FMV) of the residential part immediately before the storm was $400,000, and $385,000 immediately after the storm. Free efile for state and federal The trees were not covered by insurance. Free efile for state and federal 1) Adjusted basis $128,000 2) FMV before the storm $400,000 3) FMV after the storm 385,000 4) Decrease in FMV (line 2 − line 3) $15,000 5) Loss before insurance (lesser of line 1 or line 4) $15,000 6) Minus: Insurance -0- 7) Amount of loss $15,000 Insurance and other reimbursements. Free efile for state and federal   If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Free efile for state and federal You do not have a casualty or theft loss to the extent you are reimbursed. Free efile for state and federal   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 efile for state and federal You must reduce your loss even if you do not receive payment until a later tax year. Free efile for state and federal    Do not subtract from your loss any insurance payments you receive for living expenses if you lose the use of your main home or are denied access to it because of a casualty. Free efile for state and federal You may have to include a portion of these payments in your income. Free efile for state and federal See Insurance payments for living expenses in Publication 547 for details. Free efile for state and federal Disaster relief. Free efile for state and federal   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 efile for state and federal Excludable cash gifts you receive also do not reduce your casualty loss if there are no limits on how you can use the money. Free efile for state and federal   Generally, disaster relief grants received under the Robert T. Free efile for state and federal Stafford Disaster Relief and Emergency Assistance Act are not included in your income. Free efile for state and federal See Federal disaster relief grants , later, under Disaster Area Losses . Free efile for state and federal   Qualified disaster relief payments for expenses you incurred as a result of a federally declared disaster are not taxable income to you. Free efile for state and federal See Qualified disaster relief payments , later, under Disaster Area Losses . Free efile for state and federal Reimbursement received after deducting loss. Free efile for state and federal   If you figure your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you get your actual reimbursement. Free efile for state and federal Actual reimbursement less than expected. Free efile for state and federal   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 efile for state and federal Actual reimbursement more than expected. Free efile for state and federal   If you later receive more reimbursement than you expected after you have claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. Free efile for state and federal However, if any part of your original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. Free efile for state and federal Do not refigure your tax for the year you claimed the deduction. Free efile for state and federal See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. Free efile for state and federal 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 efile for state and federal See Figuring a Gain in Publication 547 for information on how to treat a gain from the reimbursement you receive because of a casualty or theft. Free efile for state and federal Actual reimbursement same as expected. Free efile for state and federal   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 efile for state and federal Lump-sum reimbursement. Free efile for state and federal   If you have a casualty or theft loss of several assets at the same time without an allocation of reimbursement to specific assets, divide the lump-sum reimbursement among the assets according to the fair market value of each asset at the time of the loss. Free efile for state and federal Figure the gain or loss separately for each asset that has a separate basis. Free efile for state and federal Adjustments to basis. Free efile for state and federal   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 efile for state and federal The result is your adjusted basis in the property. Free efile for state and federal Amounts you spend on repairs to restore your property to its pre-casualty condition increase your adjusted basis. Free efile for state and federal See Adjusted Basis in chapter 6 for more information. Free efile for state and federal Example. Free efile for state and federal You built a new silo for $25,000. Free efile for state and federal This is the basis in your silo because that is the total cost you incurred to build it. Free efile for state and federal During the year, a tornado damaged your silo and your allowable casualty loss deduction was $1,000. Free efile for state and federal In addition, your insurance company reimbursed you $4,000 for the damage and you spent $6,000 to restore the silo to its pre-casualty condition. Free efile for state and federal Your adjusted basis in the silo after the casualty is $26,000 ($25,000 - $1,000 - $4,000 + $6,000). Free efile for state and federal Deduction Limits on Losses of Personal-Use Property Casualty and theft losses of property held for personal use may be deductible if you itemize deductions on Schedule A (Form 1040). Free efile for state and federal There are two limits on the deduction for casualty or theft loss of personal-use property. Free efile for state and federal You figure these limits on Form 4684. Free efile for state and federal $100 rule. Free efile for state and federal   You must reduce each casualty or theft loss on personal-use property by $100. Free efile for state and federal This rule applies after you have subtracted any reimbursement. Free efile for state and federal 10% rule. Free efile for state and federal   You must further reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. Free efile for state and federal Apply this rule after you reduce each loss by $100. Free efile for state and federal Adjusted gross income is on line 38 of Form 1040. Free efile for state and federal Example. Free efile for state and federal In June, you discovered that your house had been burglarized. Free efile for state and federal Your loss after insurance reimbursement was $2,000. Free efile for state and federal Your adjusted gross income for the year you discovered the burglary is $57,000. Free efile for state and federal Figure your theft loss deduction as follows: 1. Free efile for state and federal Loss after insurance $2,000 2. Free efile for state and federal Subtract $100 100 3. Free efile for state and federal Loss after $100 rule $1,900 4. Free efile for state and federal Subtract 10% (. Free efile for state and federal 10) × $57,000 AGI $5,700 5. Free efile for state and federal Theft loss deduction -0- You do not have a theft loss deduction because your loss ($1,900) is less than 10% of your adjusted gross income ($5,700). Free efile for state and federal    If you have a casualty or theft gain in addition to a loss, you will have to make a special computation before you figure your 10% limit. Free efile for state and federal See 10% Rule in Publication 547. Free efile for state and federal When Loss Is Deductible Generally, you can deduct casualty losses that are not reimbursable only in the tax year in which they occur. Free efile for state and federal You generally can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. Free efile for state and federal However, losses in federally declared disaster areas are subject to different rules. Free efile for state and federal See Disaster Area Losses , later, for an exception. Free efile for state and federal 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 efile for state and federal Leased property. Free efile for state and federal   If you lease property from someone else, you can deduct a loss on the property in the year your liability for the loss is fixed. Free efile for state and federal This is true even if the loss occurred or the liability was paid in a different year. Free efile for state and federal You are not entitled to a deduction until your liability under the lease can be determined with reasonable accuracy. Free efile for state and federal Your liability can be determined when a claim for recovery is settled, adjudicated, or abandoned. Free efile for state and federal Example. Free efile for state and federal Robert leased a tractor from First Implement, Inc. Free efile for state and federal , for use in his farm business. Free efile for state and federal The tractor was destroyed by a tornado in June 2012. Free efile for state and federal The loss was not insured. Free efile for state and federal First Implement billed Robert for the fair market value of the tractor on the date of the loss. Free efile for state and federal Robert disagreed with the bill and refused to pay it. Free efile for state and federal First Implement later filed suit in court against Robert. Free efile for state and federal In 2013, Robert and First Implement agreed to settle the suit for $20,000, and the court entered a judgment in favor of First Implement. Free efile for state and federal Robert paid $20,000 in June 2013. Free efile for state and federal He can claim the $20,000 as a loss on his 2013 tax return. Free efile for state and federal Net operating loss (NOL). Free efile for state and federal   If your deductions, including casualty or theft loss deductions, are more than your income for the year, you may have an NOL. Free efile for state and federal An NOL can be carried back or carried forward and deducted from income in other years. Free efile for state and federal See Publication 536 for more information on NOLs. Free efile for state and federal Proof of Loss To deduct a casualty or theft loss, you must be able to prove that there was a casualty or theft. Free efile for state and federal You must have records to support the amount you claim for the loss. Free efile for state and federal Casualty loss proof. Free efile for state and federal   For a casualty loss, your records should show all the following information. Free efile for state and federal The type of casualty (car accident, fire, storm, etc. Free efile for state and federal ) and when it occurred. Free efile for state and federal That the loss was a direct result of the casualty. Free efile for state and federal 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 efile for state and federal Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Free efile for state and federal Theft loss proof. Free efile for state and federal   For a theft loss, your records should show all the following information. Free efile for state and federal When you discovered your property was missing. Free efile for state and federal That your property was stolen. Free efile for state and federal That you were the owner of the property. Free efile for state and federal Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Free efile for state and federal Figuring a Gain A casualty or theft may result in a taxable gain. Free efile for state and federal If you receive an insurance payment or other reimbursement that is more than your adjusted basis in the destroyed, damaged, or stolen property, you have a gain from the casualty or theft. Free efile for state and federal You generally report your gain as income in the year you receive the reimbursement. Free efile for state and federal However, depending on the type of property you receive, you may not have to report your gain. Free efile for state and federal See Postponing Gain , later. Free efile for state and federal Your gain is figured as follows: The amount you receive, minus Your adjusted basis in the property at the time of the casualty or theft. Free efile for state and federal Even if the decrease in FMV of your property is smaller than the adjusted basis of your property, use your adjusted basis to figure the gain. Free efile for state and federal Amount you receive. Free efile for state and federal   The amount you receive includes any money plus the value of any property you receive, minus any expenses you have in obtaining reimbursement. Free efile for state and federal It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. Free efile for state and federal Example. Free efile for state and federal A tornado severely damaged your barn. Free efile for state and federal The adjusted basis of the barn was $25,000. Free efile for state and federal Your insurance company reimbursed you $40,000 for the damaged barn. Free efile for state and federal However, you had legal expenses of $2,000 to collect that insurance. Free efile for state and federal Your insurance minus your expenses to collect the insurance is more than your adjusted basis in the barn, so you have a gain. Free efile for state and federal 1) Insurance reimbursement $40,000 2) Legal expenses 2,000 3) Amount received  (line 1 − line 2) $38,000 4) Adjusted basis 25,000 5) Gain on casualty (line 3 − line 4) $13,000 Other Involuntary Conversions In addition to casualties and thefts, other events cause involuntary conversions of property. Free efile for state and federal Some of these are discussed in the following paragraphs. Free efile for state and federal Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes. Free efile for state and federal You report the gain or deduct the loss on your tax return for the year you realize it. Free efile for state and federal However, depending on the type of property you receive, you may not have to report your gain on the involuntary conversion. Free efile for state and federal See Postponing Gain , later. Free efile for state and federal Condemnation Condemnation is the process by which private property is legally taken for public use without the owner's consent. Free efile for state and federal The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take property. Free efile for state and federal The owner receives a condemnation award (money or property) in exchange for the property taken. Free efile for state and federal A condemnation is a forced sale, the owner being the seller and the condemning authority being the buyer. Free efile for state and federal Threat of condemnation. Free efile for state and federal   Treat the sale of your property under threat of condemnation as a condemnation, provided you have reasonable grounds to believe that your property will be condemned. Free efile for state and federal Main home condemned. Free efile for state and federal   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. Free efile for state and federal For information on this exclusion, see Publication 523. Free efile for state and federal If your gain is more than the amount you can exclude, but you buy replacement property, you may be able to postpone reporting the excess gain. Free efile for state and federal See Postponing Gain , later. Free efile for state and federal (You cannot deduct a loss from the condemnation of your main home. Free efile for state and federal ) More information. Free efile for state and federal   For information on how to figure the gain or loss on condemned property, see chapter 1 in Publication 544. Free efile for state and federal Also see Postponing Gain , later, to find out if you can postpone reporting the gain. Free efile for state and federal Irrigation Project The sale or other disposition of property located within an irrigation project to conform to the acreage limits of federal reclamation laws is an involuntary conversion. Free efile for state and federal Livestock Losses Diseased livestock. Free efile for state and federal   If your livestock die from disease, or are destroyed, sold, or exchanged because of disease, even though the disease is not of epidemic proportions, treat these occurrences as involuntary conversions. Free efile for state and federal If the livestock were raised or purchased for resale, follow the rules for livestock discussed earlier under Farming Losses . Free efile for state and federal Otherwise, figure the gain or loss from these conversions using the rules discussed under Determining Gain or Loss in chapter 8. Free efile for state and federal If you replace the livestock, you may be able to postpone reporting the gain. Free efile for state and federal See Postponing Gain below. Free efile for state and federal Reporting dispositions of diseased livestock. Free efile for state and federal   If you choose to postpone reporting gain on the disposition of diseased livestock, you must attach a statement to your return explaining that the livestock were disposed of because of disease. Free efile for state and federal You must also include other information on this statement. Free efile for state and federal See How To Postpone Gain , later, under Postponing Gain . Free efile for state and federal Weather-related sales of livestock. Free efile for state and federal   If you sell or exchange livestock (other than poultry) held for draft, breeding, or dairy purposes solely because of drought, flood, or other weather-related conditions, treat the sale or exchange as an involuntary conversion. Free efile for state and federal Only livestock sold in excess of the number you normally would sell under usual business practice, in the absence of weather-related conditions, are considered involuntary conversions. Free efile for state and federal Figure the gain or loss using the rules discussed under Determining Gain or Loss in chapter 8. Free efile for state and federal If you replace the livestock, you may be able to postpone reporting the gain. Free efile for state and federal See Postponing Gain below. Free efile for state and federal Example. Free efile for state and federal It is your usual business practice to sell five of your dairy animals during the year. Free efile for state and federal This year you sold 20 dairy animals because of drought. Free efile for state and federal The sale of 15 animals is treated as an involuntary conversion. Free efile for state and federal    If you do not replace the livestock, you may be able to report the gain in the following year's income. Free efile for state and federal This rule also applies to other livestock (including poultry). Free efile for state and federal See Sales Caused by Weather-Related Conditions in chapter 3. Free efile for state and federal Tree Seedlings If, because of an abnormal drought, the failure of planted tree seedlings is greater than normally anticipated, you may have a deductible loss. Free efile for state and federal Treat the loss as a loss from an involuntary conversion. Free efile for state and federal The loss equals the previously capitalized reforestation costs you had to duplicate on replanting. Free efile for state and federal You deduct the loss on the return for the year the seedlings died. Free efile for state and federal Postponing Gain Do not report a gain if you receive reimbursement in the form of property similar or related in service or use to the destroyed, stolen, or other involuntarily converted property. Free efile for state and federal Your basis in the new property is generally the same as your adjusted basis in the property it replaces. Free efile for state and federal You must ordinarily report the gain on your stolen, destroyed, or other involuntarily converted property if you receive money or unlike property as reimbursement. Free efile for state and federal However, you can choose to postpone reporting the gain if you purchase replacement property similar or related in service or use to your destroyed, stolen, or other involuntarily converted property within a specific replacement period. Free efile for state and federal If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. Free efile for state and federal To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. Free efile for state and federal If the cost of the replacement property is less than the reimbursement, you must include the gain in your income up to the amount of the unspent reimbursement. Free efile for state and federal Example 1. Free efile for state and federal In 1985, you constructed a barn to store farm equipment at a cost of $20,000. Free efile for state and federal In 1987, you added a silo to the barn at a cost of $15,000 to store grain. Free efile for state and federal In May of this year, the property was worth $100,000. Free efile for state and federal In June the barn and silo were destroyed by a tornado. Free efile for state and federal At the time of the tornado, you had an adjusted basis of $0 in the property. Free efile for state and federal You received $85,000 from the insurance company. Free efile for state and federal You had a gain of $85,000 ($85,000 – $0). Free efile for state and federal You spent $80,000 to rebuild the barn and silo. Free efile for state and federal Since this is less than the insurance proceeds received, you must include $5,000 ($85,000 – $80,000) in your income. Free efile for state and federal Example 2. Free efile for state and federal In 1970, you bought a cabin in the mountains for your personal use at a cost of $18,000. Free efile for state and federal You made no further improvements or additions to it. Free efile for state and federal When a storm destroyed the cabin this January, the cabin was worth $250,000. Free efile for state and federal You received $146,000 from the insurance company in March. Free efile for state and federal You had a gain of $128,000 ($146,000 − $18,000). Free efile for state and federal You spent $144,000 to rebuild the cabin. Free efile for state and federal Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. Free efile for state and federal Buying replacement property from a related person. Free efile for state and federal   You cannot postpone reporting a gain from a casualty, theft, or other involuntary conversion if you buy the replacement property from a related person (discussed later). Free efile for state and federal This rule applies to the following taxpayers. Free efile for state and federal C corporations. Free efile for state and federal Partnerships in which more than 50% of the capital or profits interest is owned by C corporations. Free efile for state and federal Individuals, partnerships (other than those in (2) above), and S corporations if the total realized gain for the tax year on all involuntarily converted properties on which there are realized gains is more than $100,000. Free efile for state and federal For involuntary conversions described in (3) above, gains cannot be offset by any losses when determining whether the total gain is more than $100,000. Free efile for state and federal If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Free efile for state and federal If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Free efile for state and federal Exception. Free efile for state and federal   This rule does not apply if the related person acquired the property from an unrelated person within the period of time allowed for replacing the involuntarily converted property. Free efile for state and federal Related persons. Free efile for state and federal   Under this rule, related persons include, for example, a parent and child, a brother and sister, a corporation and an individual who owns more than 50% of its outstanding stock, and two partnerships in which the same C corporations own more than 50% of the capital or profits interests. Free efile for state and federal For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Free efile for state and federal Death of a taxpayer. Free efile for state and federal   If a taxpayer dies after having a gain, but before buying replacement property, the gain must be reported for the year in which the decedent realized the gain. Free efile for state and federal The executor of the estate or the person succeeding to the funds from the involuntary conversion cannot postpone reporting the gain by buying replacement property. Free efile for state and federal Replacement Property You must buy replacement property for the specific purpose of replacing your property. Free efile for state and federal Your replacement property must be similar or related in service or use to the property it replaces. Free efile for state and federal You do not have to use the same funds you receive as reimbursement for your old property to acquire the replacement property. Free efile for state and federal If you spend the money you receive for other purposes, and borrow money to buy replacement property, you can still choose to postpone reporting the gain if you meet the other requirements. Free efile for state and federal Property you acquire by gift or inheritance does not qualify as replacement property. Free efile for state and federal Owner-user. Free efile for state and federal   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. Free efile for state and federal Examples of property that functions in the same way as the property it replaces are a home that replaces another home, a dairy cow that replaces another dairy cow, and farm land that replaces other farm land. Free efile for state and federal A grinding mill that replaces a tractor does not qualify. Free efile for state and federal Neither does a breeding or draft animal that replaces a dairy cow. Free efile for state and federal Soil or other environmental contamination. Free efile for state and federal   If, because of soil or other environmental contamination, it is not feasible for you to reinvest your insurance money or other proceeds from destroyed or damaged livestock in property similar or related in service or use to the livestock, you can treat other property (including real property) used for farming purposes, as property similar or related in service or use to the destroyed or damaged livestock. Free efile for state and federal Weather-related conditions. Free efile for state and federal   If, because of drought, flood, or other weather-related conditions, it is not feasible for you to reinvest the insurance money or other proceeds in property similar or related in service or use to the livestock, you can treat other property (excluding real property) used for farming purposes, as property similar or related in service or use to the livestock you disposed of. Free efile for state and federal Example. Free efile for state and federal Each year you normally sell 25 cows from your beef herd. Free efile for state and federal However, this year you had to sell 50 cows. Free efile for state and federal This is because a severe drought significantly reduced the amount of hay and pasture yield needed to feed your herd for the rest of the year. Free efile for state and federal Because, as a result of the severe drought, it is not feasible for you to use the proceeds from selling the extra cows to buy new cows, you can treat other property (excluding real property) used for farming purposes, as property similar or related in service or use to the cows you sold. Free efile for state and federal Standing crop destroyed by casualty. Free efile for state and federal   If a storm or other casualty destroyed your standing crop and you use the insurance money to acquire either another standing crop or a harvested crop, this purchase qualifies as replacement property. Free efile for state and federal The costs of planting and raising a new crop qualify as replacement costs for the destroyed crop only if you use the crop method of accounting (discussed in chapter 2). Free efile for state and federal In that case, the costs of bringing the new crop to the same level of maturity as the destroyed crop qualify as replacement costs to the extent they are incurred during the replacement period. Free efile for state and federal Timber loss. Free efile for state and federal   Standing timber you bought with the proceeds from the sale of timber downed as a result of a casualty, such as high winds, earthquakes, or volcanic eruptions, qualifies as replacement property. Free efile for state and federal If you bought the standing timber within the replacement period, you can postpone reporting the gain. Free efile for state and federal Business or income-producing property located in a federally declared disaster area. Free efile for state and federal   If your destroyed business or income-producing property was located in a federally declared disaster area, any tangible replacement property you acquire for use in any business is treated as similar or related in service or use to the destroyed property. Free efile for state and federal For more information, see Disaster Area Losses in Publication 547. Free efile for state and federal Substituting replacement property. Free efile for state and federal   Once you have acquired qualified replacement property that you designate as replacement property in a statement attached to your tax return, you cannot substitute other qualified replacement property. Free efile for state and federal This is true even if you acquire the other property within the replacement period. Free efile for state and federal However, if you discover that the original replacement property was not qualified replacement property, you can, within the replacement period, substitute the new qualified replacement property. Free efile for state and federal Basis of replacement property. Free efile for state and federal   You must reduce the basis of your replacement property (its cost) by the amount of postponed gain. Free efile for state and federal In this way, tax on the gain is postponed until you dispose of the replacement property. Free efile for state and federal Replacement Period To postpone reporting your gain, you must buy replacement property within a specified period of time. Free efile for state and federal This is the replacement period. Free efile for state and federal The replacement period begins on the date your property was damaged, destroyed, stolen, sold, or exchanged. Free efile for state and federal The replacement period generally ends 2 years after the close of the first tax year in which you realize any part of your gain from the involuntary conversion. Free efile for state and federal Example. Free efile for state and federal You are a calendar year taxpayer. Free efile for state and federal While you were on vacation, farm equipment that cost $2,200 was stolen from your farm. Free efile for state and federal You discovered the theft when you returned to your farm on November 11, 2012. Free efile for state and federal Your insurance company investigated the theft and did not settle your claim until January 5, 2013, when they paid you $3,000. Free efile for state and federal You first realized a gain from the reimbursement for the theft during 2013, so you have until December 31, 2015, to replace the property. Free efile for state and federal Main home in disaster area. Free efile for state and federal   For your main home (or its contents) located in a federally declared disaster area, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the involuntary conversion. Free efile for state and federal See Disaster Area Losses , later. Free efile for state and federal Property in the Midwestern disaster areas. Free efile for state and federal   For property located in the Midwestern disaster areas (defined in Table 4 in the 2008 Publication 547) that was destroyed, damaged, stolen, or condemned, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Free efile for state and federal This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Midwestern disaster areas. Free efile for state and federal Property in the Kansas disaster area. Free efile for state and federal   For property located in the Kansas disaster area that was destroyed, damaged, stolen, or condemned after May 3, 2007, as a result of the Kansas storms and tornadoes, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Free efile for state and federal This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Kansas disaster area. Free efile for state and federal Property in the Hurricane Katrina disaster area. Free efile for state and federal   For property located in the Hurricane Katrina disaster area that was destroyed, damaged, stolen, or condemned after August 24, 2005, as a result of Hurricane Katrina, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Free efile for state and federal This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Free efile for state and federal Weather-related sales of livestock in an area eligible for federal assistance. Free efile for state and federal   For the sale or exchange of livestock due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. Free efile for state and federal The IRS may extend the replacement period on a regional basis if the weather-related conditions continue for longer than 3 years. Free efile for state and federal   For information on extensions of the replacement period because of persistent drought, see Notice 2006-82, 2006-39 I. Free efile for state and federal R. Free efile for state and federal B. Free efile for state and federal 529, available at  www. Free efile for state and federal irs. Free efile for state and federal gov/irb/2006-39_IRB/ar11. Free efile for state and federal html. Free efile for state and federal For a list of counties for which exceptional, extreme, or severe drought was reported during the 12 months ending August 31, 2013, see Notice 2013-62, available at IRS. Free efile for state and federal gov. Free efile for state and federal Condemnation. Free efile for state and federal   The replacement period for a condemnation begins on the earlier of the following dates. Free efile for state and federal The date on which you disposed of the condemned property. Free efile for state and federal The date on which the threat of condemnation began. Free efile for state and federal The replacement period generally ends 2 years after the close of the first tax year in which any part of the gain on the condemnation is realized. Free efile for state and federal But see Main home in disaster area , Property in the Midwestern disaster areas , Property in the Kansas disaster area , and Property in the Hurricane Katrina disaster area , earlier, for exceptions. Free efile for state and federal Business or investment real property. Free efile for state and federal   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the close of the first tax year in which any part of the gain on the condemnation is realized. Free efile for state and federal Extension. Free efile for state and federal   You can apply for an extension of the replacement period. Free efile for state and federal Send your written application to the Internal Revenue Service Center where you file your tax return. Free efile for state and federal See your tax return instructions for the address. Free efile for state and federal Include all the details about your need for an extension. Free efile for state and federal Make your application before the end of the replacement period. Free efile for state and federal However, you can file an application within a reasonable time after the replacement period ends if you can show a good reason for the delay. Free efile for state and federal You will get an extension of the replacement period if you can show reasonable cause for not making the replacement within the regular period. Free efile for state and federal How To Postpone Gain You postpone reporting your gain by reporting your choice on your tax return for the year you have the gain. Free efile for state and federal You have the gain in the year you receive insurance proceeds or other reimbursements that result in a gain. Free efile for state and federal Required statement. Free efile for state and federal   You should attach a statement to your return for the year you have the gain. Free efile for state and federal This statement should include all the following information. Free efile for state and federal The date and details of the casualty, theft, or other involuntary conversion. Free efile for state and federal The insurance or other reimbursement you received. Free efile for state and federal How you figured the gain. Free efile for state and federal Replacement property acquired before return filed. Free efile for state and federal   If you acquire replacement property before you file your return for the year you have the gain, your statement should also include detailed information about all the following items. Free efile for state and federal The replacement property. Free efile for state and federal The postponed gain. Free efile for state and federal The basis adjustment that reflects the postponed gain. Free efile for state and federal Any gain you are reporting as income. Free efile for state and federal Replacement property acquired after return filed. Free efile for state and federal   If you intend to buy replacement property after you file your return for the year you realize gain, your statement should also say that you are choosing to replace the property within the required replacement period. Free efile for state and federal   You should then attach another statement to your return for the year in which you buy the replacement property. Free efile for state and federal This statement should contain detailed information on the replacement property. Free efile for state and federal If you acquire part of your replacement property in one year and part in another year, you must attach a statement to each year's return. Free efile for state and federal Include in the statement detailed information on the replacement property bought in that year. Free efile for state and federal Reporting weather-related sales of livestock. Free efile for state and federal   If you choose to postpone reporting the gain on weather-related sales or exchanges of livestock, show all the following information on a statement attached to your return for the tax year in which you first realize any of the gain. Free efile for state and federal Evidence of the weather-related conditions that forced the sale or exchange of the livestock. Free efile for state and federal The gain realized on the sale or exchange. Free efile for state and federal The number and kind of livestock sold or exchanged. Free efile for state and federal The number of livestock of each kind you would have sold or exchanged under your usual business practice. Free efile for state and federal   Show all the following information and the preceding information on the return for the year in which you replace the livestock. Free efile for state and federal The dates you bought the replacement property. Free efile for state and federal The cost of the replacement property. Free efile for state and federal Description of the replacement property (for example, the number and kind of the replacement livestock). Free efile for state and federal Amended return. Free efile for state and federal   You must file an amended return (Form 1040X) for the tax year of the gain in either of the following situations. Free efile for state and federal You do not acquire replacement property within the replacement period, plus extensions. Free efile for state and federal On this amended return, you must report the gain and pay any additional tax due. Free efile for state and federal You acquire replacement property within the required replacement period, plus extensions, but at a cost less than the amount you receive from the casualty, theft, or other involuntary conversion. Free efile for state and federal On this amended return, you must report the part of the gain that cannot be postponed and pay any additional tax due. Free efile for state and federal Disaster Area Losses Special rules apply to federally declared disaster area losses. Free efile for state and federal A federally declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Robert T. Free efile for state and federal Stafford Disaster Relief and Emergency Assistance Act. Free efile for state and federal It includes a major disaster or emergency declaration under the act. Free efile for state and federal A list of the areas warranting public or individual assistance (or both) under the Act is available at the Federal Emergency Management Agency (FEMA) web site at www. Free efile for state and federal fema. Free efile for state and federal gov. Free efile for state and federal This part discusses the special rules for when to deduct a disaster area loss and what tax deadlines may be postponed. Free efile for state and federal For other special rules, see Disaster Area Losses in Publication 547. Free efile for state and federal When to deduct the loss. Free efile for state and federal   You generally must deduct a casualty loss in the year it occurred. Free efile for state and federal However, if you have a deductible loss from a disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct that loss on your return or amended return for the tax year immediately preceding the tax year in which the disaster happened. Free efile for state and federal If you make this choice, the loss is treated as having occurred in the preceding year. Free efile for state and federal    Claiming a qualifying disaster loss on the previous year's return may result in a lower tax for that year, often producing or increasing a cash refund. Free efile for state and federal   You must make the choice to take your casualty loss for the disaster in the preceding year by the later of the following dates. Free efile for state and federal The due date (without extensions) for filing your tax return for the tax year in which the disaster actually occurred. Free efile for state and federal The due date (with extensions) for the return for the preceding tax year. Free efile for state and federal Federal disaster relief grants. Free efile for state and federal   Do not include post-disaster relief grants received under the Robert T. Free efile for state and federal Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, or funeral expenses. Free efile for state and federal Do not deduct casualty losses or medical expenses to the extent they are specifically reimbursed by these disaster relief grants. Free efile for state and federal If the casualty loss was specifically reimbursed by the grant and you received the grant after the year in which you deducted the casualty loss, see Reimbursement received after deducting loss , earlier. Free efile for state and federal Unemployment assistance payments under the Act are taxable unemployment compensation. Free efile for state and federal Qualified disaster relief payments. Free efile for state and federal   Qualified disaster relief payments are not included in the income of individuals to the extent any expenses compensated by these payments are not otherwise compensated for by insurance or other reimbursement. Free efile for state and federal These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Free efile for state and federal No withholding applies to these payments. Free efile for state and federal   Qualified disaster relief payments include payments you receive (regardless of the source) for the following expenses. Free efile for state and federal Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a federally declared disaster. Free efile for state and federal Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a federally declared disaster. Free efile for state and federal (A personal residence can be a rented residence or one you own. Free efile for state and federal ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a federally declared disaster. Free efile for state and federal   Qualified disaster relief payments include amounts paid by a federal, state, or local government in connection with a federally declared disaster to individuals affected by the disaster. Free efile for state and federal    Qualified disaster relief payments do not include: Payments for expenses otherwise paid for by insurance or other reimbursements, or Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation. Free efile for state and federal Qualified disaster mitigation payments. Free efile for state and federal   Qualified disaster mitigation payments made under the Robert T. Free efile for state and federal Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not included in income. Free efile for state and federal These are payments you, as a property owner, receive to reduce the risk of future damage to your property. Free efile for state and federal You cannot increase your basis in property, or take a deduction or credit, for expenditures made with respect to those payments. Free efile for state and federal Sale of property under hazard mitigation program. Free efile for state and federal   Generally, if you sell or otherwise transfer property, you must recognize any gain or loss for tax purposes unless the property is your main home. Free efile for state and federal You report the gain or deduct the loss on your tax return for the year you realize it. Free efile for state and federal (You cannot deduct a loss on personal-use property unless the loss resulted from a casualty, as discussed earlier. Free efile for state and federal ) However, if you sell or otherwise transfer property to the Federal Government, a state or local government, or an Indian tribal government under a hazard mitigation program, you can choose to postpone reporting the gain if you buy qualifying replacement property within a certain period of time. Free efile for state and federal See Postponing Gain , earlier, for the rules that apply. Free efile for state and federal Other federal assistance programs. Free efile for state and federal    For more information about other federal assistance programs, see Crop Insurance and Crop Disaster Payments and Feed Assistance and Payments in chapter 3 earlier. Free efile for state and federal Postponed tax deadlines. Free efile for state and federal   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. Free efile for state and federal The tax deadlines the IRS may postpone include those for filing income, excise, and employment tax returns, paying income, excise, and employment taxes, and making contributions to a traditional IRA or Roth IRA. Free efile for state and federal   If any tax deadline is postponed, the IRS will publicize the postponement in your area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Free efile for state and federal Go to http://www. Free efile for state and federal irs. Free efile for state and federal gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. Free efile for state and federal Who is eligible. Free efile for state and federal   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Free efile for state and federal Any individual whose main home is located in a covered disaster area (defined next). Free efile for state and federal Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. Free efile for state and federal Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered disaster area. Free efile for state and federal 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 efile for state and federal The main home or principal place of business does not have to be located in the covered disaster area. Free efile for state and federal 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 efile for state and federal The spouse on a joint return with a taxpayer who is eligible for postponements. Free efile for state and federal Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose necessary records to meet a postponed tax deadline are located in the covered disaster area. Free efile for state and federal Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. Free efile for state and federal Any other person determined by the IRS to be affected by a federally declared disaster. Free efile for state and federal Covered disaster area. Free efile for state and federal   This is an area of a federally declared disaster area in which the IRS has decided to postpone tax deadlines for up to 1 year. Free efile for state and federal Abatement of interest and penalties. Free efile for state and federal   The IRS may abate the interest and penalties on the underpaid income tax for the length of any postponement of tax deadlines. Free efile for state and federal Reporting Gains and Losses You will have to file one or more of the following forms to report your gains or losses from involuntary conversions. Free efile for state and federal Form 4684. Free efile for state and federal   Use this form to report your gains and losses from casualties and thefts. Free efile for state and federal Form 4797. Free efile for state and federal   Use this form to report involuntary conversions (other than from casualty or theft) of property used in your trade or business and capital assets held in connection with a trade or business or a transaction entered into for profit. Free efile for state and federal Also use this form if you have a gain from a casualty or theft on trade, business or income-producing property held for more than 1 year and you have to recapture some or all of your gain as ordinary income. Free efile for state and federal Form 8949. Free efile for state and federal   Use this form to report gain from an involuntary conversion (other than from casualty or theft) of personal-use property. Free efile for state and federal Schedule A (Form 1040). Free efile for state and federal   Use this form to deduct your losses from casualties and thefts of personal-use property and income-producing property, that you reported on Form 4684. Free efile for state and federal Schedule D (Form 1040). Free efile for state and federal   Use this form to carry over the following gains. Free efile for state and federal Net gain shown on Form 4797 from an involuntary conversion of business property held for more than 1 year. Free efile for state and federal Net gain shown on Form 4684 from the casualty or theft of personal-use property. Free efile for state and federal    Also use this form to figure the overall gain or loss from transactions reported on Form 8949. Free efile for state and federal Schedule F (Form 1040). Free efile for state and federal   Use this form to deduct your losses from casualty or theft of livestock or produce bought for sale under Other expenses in Part II, line 32, if you use the cash method of accounting and have not otherwise deducted these losses. Free efile for state and federal Prev  Up  Next   Home   More Online Publications
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Letter 2318C Frequently Asked Questions (FAQs)

What is the letter telling me?

This letter is a result of your oral or written request to pay your tax liability through Payroll Deductions. It also explains the necessary fees charged for paying monthly.

What do I have to do?

Provide us with your employer's signature which agrees to deducting a specific amount from your pay check and sending that amount to the IRS.

How much time do I have?

The letter provides you a specific time frame to respond.

What happens if I don't take any action?

If you fail to make the payments, enforced collection action may be taken to collect the amount you owe, including the filing of a Notice of Federal Tax Lien, or garnishment of your wages and/or bank accounts.

Who should I contact?

The letter will provide you a toll free number. The person who answers the phone will assist you.

What if I don't agree or have already taken corrective action?

You should contact us immediately. You can also contact us to verify that your payroll deduction has been established.

Page Last Reviewed or Updated: 30-Jan-2014

The Free Efile For State And Federal

Free efile for state and federal Publication 525 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionAssignment of income. Free efile for state and federal Ordering forms and publications. Free efile for state and federal Tax questions. Free efile for state and federal Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 525, such as legislation enacted after it was published, go to www. Free efile for state and federal irs. Free efile for state and federal gov/pub525. Free efile for state and federal What's New Health flexible spending arrangements (health FSAs) under cafeteria plans. Free efile for state and federal  For plan years beginning after 2012, health FSAs are subject to a $2,500 limit on salary reduction contributions. Free efile for state and federal For plan years beginning after 2013, the $2,500 limit is subject to an inflation adjustment. Free efile for state and federal Itemized deduction for medical expenses. Free efile for state and federal  Beginning in 2013, an itemized deduction is generally allowed for uncompensated medical expenses that exceed 10% of adjusted gross income (AGI). Free efile for state and federal If an individual or an individual’s spouse was born before January 2, 1949, the deduction is allowed for expenses that exceed 7. Free efile for state and federal 5% of AGI. Free efile for state and federal Additional Medicare Tax. Free efile for state and federal  Beginning in 2013, a 0. Free efile for state and federal 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 if single, head of household, or qualifying widow(er). Free efile for state and federal For more information, see Form 8959 and its instructions. Free efile for state and federal Net Investment Income Tax (NIIT). Free efile for state and federal  Beginning in 2013, the NIIT applies at a rate of 3. Free efile for state and federal 8% to certain net investment income of individuals, estates and trusts that have income above the threshold amounts. Free efile for state and federal Individuals will owe the tax if they have net investment income and also have modified adjusted gross income over the following thresholds for their filing status: Married filing jointly, $250,000; Married filing separately, $125,000; Single, $200,000; Head of household (with qualifying person), $200,000; Qualifying widow(er) with dependent child, $250,000. Free efile for state and federal For more information, see Form 8960 and its instructions. Free efile for state and federal Reminders Terrorist attacks. Free efile for state and federal  You can exclude from income certain disaster assistance, disability, and death payments received as a result of a terrorist or military action. Free efile for state and federal For more information, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. Free efile for state and federal Gulf oil spill. Free efile for state and federal  You are required to include in your gross income payments you received for lost wages, lost business income, or lost profits. Free efile for state and federal See Gulf oil spill under Other Income, later. Free efile for state and federal Qualified settlement income. Free efile for state and federal . Free efile for state and federal  If you are a qualified taxpayer, you can contribute all or part of your qualified settlement income, up to $100,000, to an eligible retirement plan, including an IRA. Free efile for state and federal Contributions to eligible retirement plans, other than a Roth IRA or a designated Roth contribution, reduce the qualified settlement income that you must include in income. Free efile for state and federal See Exxon Valdez settlement income under Other Income, later. Free efile for state and federal Foreign income. Free efile for state and federal  If you are a U. Free efile for state and federal S. Free efile for state and federal citizen or resident alien, you must report income from sources outside the United States (foreign income) on your tax return unless it is exempt by U. Free efile for state and federal S. Free efile for state and federal law. Free efile for state and federal This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2, Wage and Tax Statement, or Form 1099 from the foreign payer. Free efile for state and federal This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). Free efile for state and federal If you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. Free efile for state and federal For details, see Publication 54, Tax Guide for U. Free efile for state and federal S. Free efile for state and federal Citizens and Resident Aliens Abroad. Free efile for state and federal Disaster mitigation payments. Free efile for state and federal . Free efile for state and federal  You can exclude from income grants you use to mitigate (reduce the severity of) potential damage from future natural disasters that are paid to you through state and local governments. Free efile for state and federal For more information, see Disaster mitigation payments under Welfare and Other Public Assistance Benefits, later. Free efile for state and federal Qualified joint venture. Free efile for state and federal  A qualified joint venture conducted by you and your spouse may not be treated as a partnership if you file a joint return for the tax year. Free efile for state and federal See Partnership Income under Business and Investment Income, later. Free efile for state and federal Photographs of missing children. Free efile for state and federal  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free efile for state and federal Photographs of missing children selected by the Center may appear in this publication on pages that otherwise would be blank. Free efile for state and federal You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Free efile for state and federal Introduction You can receive income in the form of money, property, or services. Free efile for state and federal This publication discusses many kinds of income and explains whether they are taxable or nontaxable. Free efile for state and federal It includes discussions on employee wages and fringe benefits, and income from bartering, partnerships, S corporations, and royalties. Free efile for state and federal It also includes information on disability pensions, life insurance proceeds, and welfare and other public assistance benefits. Free efile for state and federal Check the index for the location of a specific subject. Free efile for state and federal In most cases, an amount included in your income is taxable unless it is specifically exempted by law. Free efile for state and federal Income that is taxable must be reported on your return and is subject to tax. Free efile for state and federal Income that is nontaxable may have to be shown on your tax return but is not taxable. Free efile for state and federal Constructively received income. Free efile for state and federal   You are generally taxed on income that is available to you, regardless of whether it is actually in your possession. Free efile for state and federal    A valid check that you received or that was made available to you before the end of the tax year is considered income constructively received in that year, even if you do not cash the check or deposit it to your account until the next year. Free efile for state and federal For example, if the postal service tries to deliver a check to you on the last day of the tax year but you are not at home to receive it, you must include the amount in your income for that tax year. Free efile for state and federal If the check was mailed so that it could not possibly reach you until after the end of the tax year, and you otherwise could not get the funds before the end of the year, you include the amount in your income for the next tax year. Free efile for state and federal Assignment of income. Free efile for state and federal   Income received by an agent for you is income you constructively received in the year the agent received it. Free efile for state and federal If you agree by contract that a third party is to receive income for you, you must include the amount in your income when the third party receives it. Free efile for state and federal Example. Free efile for state and federal You and your employer agree that part of your salary is to be paid directly to one of your creditors. Free efile for state and federal You must include that amount in your income when your creditor receives it. Free efile for state and federal Prepaid income. Free efile for state and federal   In most cases, prepaid income, such as compensation for future services, is included in your income in the year you receive it. Free efile for state and federal However, if you use an accrual method of accounting, you can defer prepaid income you receive for services to be performed before the end of the next tax year. Free efile for state and federal In this case, you include the payment in your income as you earn it by performing the services. Free efile for state and federal Comments and suggestions. Free efile for state and federal   We welcome your comments about this publication and your suggestions for future editions. Free efile for state and federal   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free efile for state and federal NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free efile for state and federal Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free efile for state and federal   You can send your comments from www. Free efile for state and federal irs. Free efile for state and federal gov/formspubs/. Free efile for state and federal Click on “More Information” and then on “Comment on Tax Forms and Publications. Free efile for state and federal ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Free efile for state and federal Ordering forms and publications. Free efile for state and federal   Visit www. Free efile for state and federal irs. Free efile for state and federal gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Free efile for state and federal Internal Revenue Service 1201 N. Free efile for state and federal Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free efile for state and federal   If you have a tax question, check the information available on IRS. Free efile for state and federal gov or call 1-800-829-1040. Free efile for state and federal We cannot answer tax questions sent to either of the above addresses. Free efile for state and federal Useful Items - You may want to see: Publication 334 Tax Guide for Small Business 523 Selling Your Home 527 Residential Rental Property 541 Partnerships 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 559 Survivors, Executors, and Administrators 575 Pension and Annuity Income 915 Social Security and Equivalent Railroad Retirement Benefits 970 Tax Benefits for Education 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) 1040 U. Free efile for state and federal S. Free efile for state and federal Individual Income Tax Return 1040A U. Free efile for state and federal S. Free efile for state and federal Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1040NR U. Free efile for state and federal S. Free efile for state and federal Nonresident Alien Income Tax Return 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Free efile for state and federal W-2 Wage and Tax Statement  See How To Get Tax Help , near the end of this publication, for information about getting these publications. Free efile for state and federal Prev  Up  Next   Home   More Online Publications