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Irs Forms 1040 Ez

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Irs Forms 1040 Ez

Irs forms 1040 ez 11. Irs forms 1040 ez   Casualties, Thefts, and Condemnations Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Casualties and TheftsDeductible losses. Irs forms 1040 ez Nondeductible losses. Irs forms 1040 ez Family pet. Irs forms 1040 ez Progressive deterioration. Irs forms 1040 ez Decline in market value of stock. Irs forms 1040 ez Mislaid or lost property. Irs forms 1040 ez 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. Irs forms 1040 ez Related persons. Irs forms 1040 ez Replacement Property Replacement Period How To Postpone Gain Disaster Area LossesWho is eligible. Irs forms 1040 ez Covered disaster area. Irs forms 1040 ez Reporting Gains and Losses Introduction This chapter explains the tax treatment of casualties, thefts, and condemnations. Irs forms 1040 ez A casualty occurs when property is damaged, destroyed, or lost due to a sudden, unexpected, or unusual event. Irs forms 1040 ez A theft occurs when property is stolen. Irs forms 1040 ez A condemnation occurs when private property is legally taken for public use without the owner's consent. Irs forms 1040 ez A casualty, theft, or condemnation may result in a deductible loss or taxable gain on your federal income tax return. Irs forms 1040 ez 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. Irs forms 1040 ez 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. Irs forms 1040 ez 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. Irs forms 1040 ez For more information, see Postponing Gain , later. Irs forms 1040 ez 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. Irs forms 1040 ez Casualties and Thefts If your property is destroyed, damaged, or stolen, you may have a deductible loss. Irs forms 1040 ez 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. Irs forms 1040 ez Casualty. Irs forms 1040 ez   A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Irs forms 1040 ez A sudden event is one that is swift, not gradual or progressive. Irs forms 1040 ez An unexpected event is one that is ordinarily unanticipated and unintended. Irs forms 1040 ez 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. Irs forms 1040 ez Deductible losses. Irs forms 1040 ez   Deductible casualty losses can result from a number of different causes, including the following. Irs forms 1040 ez Airplane crashes. Irs forms 1040 ez Car, truck, or farm equipment accidents not resulting from your willful act or willful negligence. Irs forms 1040 ez Earthquakes. Irs forms 1040 ez Fires (but see Nondeductible losses next for exceptions). Irs forms 1040 ez Floods. Irs forms 1040 ez Freezing. Irs forms 1040 ez 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. Irs forms 1040 ez Lightning. Irs forms 1040 ez Storms, including hurricanes and tornadoes. Irs forms 1040 ez Terrorist attacks. Irs forms 1040 ez Vandalism. Irs forms 1040 ez Volcanic eruptions. Irs forms 1040 ez Nondeductible losses. Irs forms 1040 ez   A casualty loss is not deductible if the damage or destruction is caused by the following. Irs forms 1040 ez Accidentally breaking articles such as glassware or china under normal conditions. Irs forms 1040 ez A family pet (explained below). Irs forms 1040 ez A fire if you willfully set it, or pay someone else to set it. Irs forms 1040 ez A car, truck, or farm equipment accident if your willful negligence or willful act caused it. Irs forms 1040 ez The same is true if the willful act or willful negligence of someone acting for you caused the accident. Irs forms 1040 ez Progressive deterioration (explained below). Irs forms 1040 ez Family pet. Irs forms 1040 ez   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. Irs forms 1040 ez Example. Irs forms 1040 ez You keep your horse in your yard. Irs forms 1040 ez The ornamental fruit trees in your yard were damaged when your horse stripped the bark from them. Irs forms 1040 ez Some of the trees were completely girdled and died. Irs forms 1040 ez Because the damage was not unexpected or unusual, the loss is not deductible. Irs forms 1040 ez Progressive deterioration. Irs forms 1040 ez   Loss of property due to progressive deterioration is not deductible as a casualty loss. Irs forms 1040 ez This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Irs forms 1040 ez Examples of damage due to progressive deterioration include damage from rust, corrosion, or termites. Irs forms 1040 ez However, weather-related conditions or disease may cause another type of involuntary conversion. Irs forms 1040 ez See Other Involuntary Conversions , later. Irs forms 1040 ez Theft. Irs forms 1040 ez   A theft is the taking and removing of money or property with the intent to deprive the owner of it. Irs forms 1040 ez 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. Irs forms 1040 ez You do not need to show a conviction for theft. Irs forms 1040 ez   Theft includes the taking of money or property by the following means: Blackmail, Burglary, Embezzlement, Extortion, Kidnapping for ransom, Larceny, Robbery, or Threats. Irs forms 1040 ez The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Irs forms 1040 ez Decline in market value of stock. Irs forms 1040 ez   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. Irs forms 1040 ez 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. Irs forms 1040 ez You report a capital loss on Schedule D (Form 1040). Irs forms 1040 ez For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Irs forms 1040 ez Mislaid or lost property. Irs forms 1040 ez   The simple disappearance of money or property is not a theft. Irs forms 1040 ez 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. Irs forms 1040 ez Example. Irs forms 1040 ez A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Irs forms 1040 ez The diamond falls from the ring and is never found. Irs forms 1040 ez The loss of the diamond is a casualty. Irs forms 1040 ez Farming Losses You can deduct certain casualty or theft losses that occur in the business of farming. Irs forms 1040 ez The following is a discussion of some losses you can deduct and some you cannot deduct. Irs forms 1040 ez Livestock or produce bought for resale. Irs forms 1040 ez   Casualty or theft losses of livestock or produce bought for resale are deductible if you report your income on the cash method. Irs forms 1040 ez 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. Irs forms 1040 ez You cannot take a separate deduction. Irs forms 1040 ez Livestock, plants, produce, and crops raised for sale. Irs forms 1040 ez   Losses of livestock, plants, produce, and crops raised for sale are generally not deductible if you report your income on the cash method. Irs forms 1040 ez You have already deducted the cost of raising these items as farm expenses, so their basis is equal to zero. Irs forms 1040 ez   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. Irs forms 1040 ez You usually have a tax basis if you capitalized the expenses associated with these plants under the uniform capitalization rules. Irs forms 1040 ez The uniform capitalization rules are discussed in chapter 6. Irs forms 1040 ez   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. Irs forms 1040 ez You get the deduction by omitting the item from your inventory at the close of your tax year. Irs forms 1040 ez You cannot take a separate casualty or theft deduction. Irs forms 1040 ez Income loss. Irs forms 1040 ez   A loss of future income is not deductible. Irs forms 1040 ez Example. Irs forms 1040 ez A severe flood destroyed your crops. Irs forms 1040 ez 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 . Irs forms 1040 ez You estimate that the crop loss will reduce your farm income by $25,000. Irs forms 1040 ez This loss of future income is also not deductible. Irs forms 1040 ez Loss of timber. Irs forms 1040 ez   If you sell timber downed as a result of a casualty, treat the proceeds from the sale as a reimbursement. Irs forms 1040 ez If you use the proceeds to buy qualified replacement property, you can postpone reporting the gain. Irs forms 1040 ez See Postponing Gain , later. Irs forms 1040 ez Property used in farming. Irs forms 1040 ez   Casualty and theft losses of property used in your farm business usually result in deductible losses. Irs forms 1040 ez 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. Irs forms 1040 ez See How To Figure a Loss , later. Irs forms 1040 ez Raised draft, breeding, dairy, or sporting animals. Irs forms 1040 ez   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. Irs forms 1040 ez 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. Irs forms 1040 ez You use inventories to determine your income and you included the animals in your inventory. Irs forms 1040 ez 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. Irs forms 1040 ez When you include livestock in inventory, its last inventory value is its basis. Irs forms 1040 ez 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. Irs forms 1040 ez You cannot take a separate deduction. Irs forms 1040 ez 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. Irs forms 1040 ez Farm property. Irs forms 1040 ez   Farm property is the property you use in your farming business. Irs forms 1040 ez 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. Irs forms 1040 ez   If your farm property was partially damaged, use the steps shown under Personal-use property next to figure your casualty loss. Irs forms 1040 ez However, the deduction limits, discussed later, do not apply to farm property. Irs forms 1040 ez Personal-use property. Irs forms 1040 ez   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. Irs forms 1040 ez The following items are examples of personal-use property: Your main home. Irs forms 1040 ez Furniture and electronics used in your main home and not used in a home office or for business purposes. Irs forms 1040 ez Clothing and jewelry. Irs forms 1040 ez An automobile used for nonbusiness purposes. Irs forms 1040 ez You figure the casualty or theft loss on this property by taking the following steps. Irs forms 1040 ez Determine your adjusted basis in the property before the casualty or theft. Irs forms 1040 ez Determine the decrease in fair market value of the property as a result of the casualty or theft. Irs forms 1040 ez From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you receive or expect to receive. Irs forms 1040 ez You must apply the deduction limits, discussed later, to determine your deductible loss. Irs forms 1040 ez    You can use Publication 584 to list your stolen or damaged personal-use property and figure your loss. Irs forms 1040 ez It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. Irs forms 1040 ez Adjusted basis. Irs forms 1040 ez   Adjusted basis is your basis (usually cost) increased or decreased by various events, such as improvements and casualty losses. Irs forms 1040 ez For more information about adjusted basis, see chapter 6. Irs forms 1040 ez Decrease in fair market value (FMV). Irs forms 1040 ez   The decrease in FMV is the difference between the property's value immediately before the casualty or theft and its value immediately afterward. Irs forms 1040 ez FMV is defined in chapter 10 under Payments Received or Considered Received . Irs forms 1040 ez Appraisal. Irs forms 1040 ez   To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. Irs forms 1040 ez But other measures, such as the cost of cleaning up or making repairs (discussed next) can be used to establish decreases in FMV. Irs forms 1040 ez   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. Irs forms 1040 ez The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Irs forms 1040 ez This information is needed to limit any deduction to the actual loss resulting from damage to the property. Irs forms 1040 ez Cost of cleaning up or making repairs. Irs forms 1040 ez   The cost of cleaning up after a casualty is not part of a casualty loss. Irs forms 1040 ez Neither is the cost of repairing damaged property after a casualty. Irs forms 1040 ez 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. Irs forms 1040 ez The repairs are actually made. Irs forms 1040 ez The repairs are necessary to bring the property back to its condition before the casualty. Irs forms 1040 ez The amount spent for repairs is not excessive. Irs forms 1040 ez The repairs fix the damage only. Irs forms 1040 ez The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Irs forms 1040 ez Related expenses. Irs forms 1040 ez   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. Irs forms 1040 ez However, they may be deductible as farm business expenses if the damaged or stolen property is farm property. Irs forms 1040 ez Separate computations for more than one item of property. Irs forms 1040 ez   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. Irs forms 1040 ez Then combine the losses to determine your total loss. Irs forms 1040 ez    There is an exception to this rule for personal-use real property. Irs forms 1040 ez See Exception for personal-use real property, later. Irs forms 1040 ez Example. Irs forms 1040 ez A fire on your farm damaged a tractor and the barn in which it was stored. Irs forms 1040 ez The tractor had an adjusted basis of $3,300. Irs forms 1040 ez Its FMV was $28,000 just before the fire and $10,000 immediately afterward. Irs forms 1040 ez The barn had an adjusted basis of $28,000. Irs forms 1040 ez Its FMV was $55,000 just before the fire and $25,000 immediately afterward. Irs forms 1040 ez You received insurance reimbursements of $2,100 on the tractor and $26,000 on the barn. Irs forms 1040 ez Figure your deductible casualty loss separately for the two items of property. Irs forms 1040 ez     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. Irs forms 1040 ez   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. Irs forms 1040 ez Figure the loss using the smaller of the following. Irs forms 1040 ez The decrease in FMV of the entire property. Irs forms 1040 ez The adjusted basis of the entire property. Irs forms 1040 ez Example. Irs forms 1040 ez You bought a farm in 1990 for $160,000. Irs forms 1040 ez The adjusted basis of the residential part is now $128,000. Irs forms 1040 ez In 2013, a windstorm blew down shade trees and three ornamental trees planted at a cost of $7,500 on the residential part. Irs forms 1040 ez The adjusted basis of the residential part includes the $7,500. Irs forms 1040 ez The fair market value (FMV) of the residential part immediately before the storm was $400,000, and $385,000 immediately after the storm. Irs forms 1040 ez The trees were not covered by insurance. Irs forms 1040 ez 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. Irs forms 1040 ez   If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Irs forms 1040 ez You do not have a casualty or theft loss to the extent you are reimbursed. Irs forms 1040 ez   If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Irs forms 1040 ez You must reduce your loss even if you do not receive payment until a later tax year. Irs forms 1040 ez    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. Irs forms 1040 ez You may have to include a portion of these payments in your income. Irs forms 1040 ez See Insurance payments for living expenses in Publication 547 for details. Irs forms 1040 ez Disaster relief. Irs forms 1040 ez   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. Irs forms 1040 ez Excludable cash gifts you receive also do not reduce your casualty loss if there are no limits on how you can use the money. Irs forms 1040 ez   Generally, disaster relief grants received under the Robert T. Irs forms 1040 ez Stafford Disaster Relief and Emergency Assistance Act are not included in your income. Irs forms 1040 ez See Federal disaster relief grants , later, under Disaster Area Losses . Irs forms 1040 ez   Qualified disaster relief payments for expenses you incurred as a result of a federally declared disaster are not taxable income to you. Irs forms 1040 ez See Qualified disaster relief payments , later, under Disaster Area Losses . Irs forms 1040 ez Reimbursement received after deducting loss. Irs forms 1040 ez   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. Irs forms 1040 ez Actual reimbursement less than expected. Irs forms 1040 ez   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. Irs forms 1040 ez Actual reimbursement more than expected. Irs forms 1040 ez   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. Irs forms 1040 ez 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. Irs forms 1040 ez Do not refigure your tax for the year you claimed the deduction. Irs forms 1040 ez See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. Irs forms 1040 ez 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. Irs forms 1040 ez 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. Irs forms 1040 ez Actual reimbursement same as expected. Irs forms 1040 ez   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. Irs forms 1040 ez Lump-sum reimbursement. Irs forms 1040 ez   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. Irs forms 1040 ez Figure the gain or loss separately for each asset that has a separate basis. Irs forms 1040 ez Adjustments to basis. Irs forms 1040 ez   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. Irs forms 1040 ez The result is your adjusted basis in the property. Irs forms 1040 ez Amounts you spend on repairs to restore your property to its pre-casualty condition increase your adjusted basis. Irs forms 1040 ez See Adjusted Basis in chapter 6 for more information. Irs forms 1040 ez Example. Irs forms 1040 ez You built a new silo for $25,000. Irs forms 1040 ez This is the basis in your silo because that is the total cost you incurred to build it. Irs forms 1040 ez During the year, a tornado damaged your silo and your allowable casualty loss deduction was $1,000. Irs forms 1040 ez 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. Irs forms 1040 ez Your adjusted basis in the silo after the casualty is $26,000 ($25,000 - $1,000 - $4,000 + $6,000). Irs forms 1040 ez 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). Irs forms 1040 ez There are two limits on the deduction for casualty or theft loss of personal-use property. Irs forms 1040 ez You figure these limits on Form 4684. Irs forms 1040 ez $100 rule. Irs forms 1040 ez   You must reduce each casualty or theft loss on personal-use property by $100. Irs forms 1040 ez This rule applies after you have subtracted any reimbursement. Irs forms 1040 ez 10% rule. Irs forms 1040 ez   You must further reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. Irs forms 1040 ez Apply this rule after you reduce each loss by $100. Irs forms 1040 ez Adjusted gross income is on line 38 of Form 1040. Irs forms 1040 ez Example. Irs forms 1040 ez In June, you discovered that your house had been burglarized. Irs forms 1040 ez Your loss after insurance reimbursement was $2,000. Irs forms 1040 ez Your adjusted gross income for the year you discovered the burglary is $57,000. Irs forms 1040 ez Figure your theft loss deduction as follows: 1. Irs forms 1040 ez Loss after insurance $2,000 2. Irs forms 1040 ez Subtract $100 100 3. Irs forms 1040 ez Loss after $100 rule $1,900 4. Irs forms 1040 ez Subtract 10% (. Irs forms 1040 ez 10) × $57,000 AGI $5,700 5. Irs forms 1040 ez 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). Irs forms 1040 ez    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. Irs forms 1040 ez See 10% Rule in Publication 547. Irs forms 1040 ez When Loss Is Deductible Generally, you can deduct casualty losses that are not reimbursable only in the tax year in which they occur. Irs forms 1040 ez You generally can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. Irs forms 1040 ez However, losses in federally declared disaster areas are subject to different rules. Irs forms 1040 ez See Disaster Area Losses , later, for an exception. Irs forms 1040 ez 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. Irs forms 1040 ez Leased property. Irs forms 1040 ez   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. Irs forms 1040 ez This is true even if the loss occurred or the liability was paid in a different year. Irs forms 1040 ez You are not entitled to a deduction until your liability under the lease can be determined with reasonable accuracy. Irs forms 1040 ez Your liability can be determined when a claim for recovery is settled, adjudicated, or abandoned. Irs forms 1040 ez Example. Irs forms 1040 ez Robert leased a tractor from First Implement, Inc. Irs forms 1040 ez , for use in his farm business. Irs forms 1040 ez The tractor was destroyed by a tornado in June 2012. Irs forms 1040 ez The loss was not insured. Irs forms 1040 ez First Implement billed Robert for the fair market value of the tractor on the date of the loss. Irs forms 1040 ez Robert disagreed with the bill and refused to pay it. Irs forms 1040 ez First Implement later filed suit in court against Robert. Irs forms 1040 ez 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. Irs forms 1040 ez Robert paid $20,000 in June 2013. Irs forms 1040 ez He can claim the $20,000 as a loss on his 2013 tax return. Irs forms 1040 ez Net operating loss (NOL). Irs forms 1040 ez   If your deductions, including casualty or theft loss deductions, are more than your income for the year, you may have an NOL. Irs forms 1040 ez An NOL can be carried back or carried forward and deducted from income in other years. Irs forms 1040 ez See Publication 536 for more information on NOLs. Irs forms 1040 ez Proof of Loss To deduct a casualty or theft loss, you must be able to prove that there was a casualty or theft. Irs forms 1040 ez You must have records to support the amount you claim for the loss. Irs forms 1040 ez Casualty loss proof. Irs forms 1040 ez   For a casualty loss, your records should show all the following information. Irs forms 1040 ez The type of casualty (car accident, fire, storm, etc. Irs forms 1040 ez ) and when it occurred. Irs forms 1040 ez That the loss was a direct result of the casualty. Irs forms 1040 ez 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. Irs forms 1040 ez Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Irs forms 1040 ez Theft loss proof. Irs forms 1040 ez   For a theft loss, your records should show all the following information. Irs forms 1040 ez When you discovered your property was missing. Irs forms 1040 ez That your property was stolen. Irs forms 1040 ez That you were the owner of the property. Irs forms 1040 ez Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Irs forms 1040 ez Figuring a Gain A casualty or theft may result in a taxable gain. Irs forms 1040 ez 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. Irs forms 1040 ez You generally report your gain as income in the year you receive the reimbursement. Irs forms 1040 ez However, depending on the type of property you receive, you may not have to report your gain. Irs forms 1040 ez See Postponing Gain , later. Irs forms 1040 ez 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. Irs forms 1040 ez 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. Irs forms 1040 ez Amount you receive. Irs forms 1040 ez   The amount you receive includes any money plus the value of any property you receive, minus any expenses you have in obtaining reimbursement. Irs forms 1040 ez It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. Irs forms 1040 ez Example. Irs forms 1040 ez A tornado severely damaged your barn. Irs forms 1040 ez The adjusted basis of the barn was $25,000. Irs forms 1040 ez Your insurance company reimbursed you $40,000 for the damaged barn. Irs forms 1040 ez However, you had legal expenses of $2,000 to collect that insurance. Irs forms 1040 ez Your insurance minus your expenses to collect the insurance is more than your adjusted basis in the barn, so you have a gain. Irs forms 1040 ez 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. Irs forms 1040 ez Some of these are discussed in the following paragraphs. Irs forms 1040 ez Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes. Irs forms 1040 ez You report the gain or deduct the loss on your tax return for the year you realize it. Irs forms 1040 ez However, depending on the type of property you receive, you may not have to report your gain on the involuntary conversion. Irs forms 1040 ez See Postponing Gain , later. Irs forms 1040 ez Condemnation Condemnation is the process by which private property is legally taken for public use without the owner's consent. Irs forms 1040 ez 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. Irs forms 1040 ez The owner receives a condemnation award (money or property) in exchange for the property taken. Irs forms 1040 ez A condemnation is a forced sale, the owner being the seller and the condemning authority being the buyer. Irs forms 1040 ez Threat of condemnation. Irs forms 1040 ez   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. Irs forms 1040 ez Main home condemned. Irs forms 1040 ez   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. Irs forms 1040 ez For information on this exclusion, see Publication 523. Irs forms 1040 ez 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. Irs forms 1040 ez See Postponing Gain , later. Irs forms 1040 ez (You cannot deduct a loss from the condemnation of your main home. Irs forms 1040 ez ) More information. Irs forms 1040 ez   For information on how to figure the gain or loss on condemned property, see chapter 1 in Publication 544. Irs forms 1040 ez Also see Postponing Gain , later, to find out if you can postpone reporting the gain. Irs forms 1040 ez 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. Irs forms 1040 ez Livestock Losses Diseased livestock. Irs forms 1040 ez   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. Irs forms 1040 ez If the livestock were raised or purchased for resale, follow the rules for livestock discussed earlier under Farming Losses . Irs forms 1040 ez Otherwise, figure the gain or loss from these conversions using the rules discussed under Determining Gain or Loss in chapter 8. Irs forms 1040 ez If you replace the livestock, you may be able to postpone reporting the gain. Irs forms 1040 ez See Postponing Gain below. Irs forms 1040 ez Reporting dispositions of diseased livestock. Irs forms 1040 ez   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. Irs forms 1040 ez You must also include other information on this statement. Irs forms 1040 ez See How To Postpone Gain , later, under Postponing Gain . Irs forms 1040 ez Weather-related sales of livestock. Irs forms 1040 ez   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. Irs forms 1040 ez 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. Irs forms 1040 ez Figure the gain or loss using the rules discussed under Determining Gain or Loss in chapter 8. Irs forms 1040 ez If you replace the livestock, you may be able to postpone reporting the gain. Irs forms 1040 ez See Postponing Gain below. Irs forms 1040 ez Example. Irs forms 1040 ez It is your usual business practice to sell five of your dairy animals during the year. Irs forms 1040 ez This year you sold 20 dairy animals because of drought. Irs forms 1040 ez The sale of 15 animals is treated as an involuntary conversion. Irs forms 1040 ez    If you do not replace the livestock, you may be able to report the gain in the following year's income. Irs forms 1040 ez This rule also applies to other livestock (including poultry). Irs forms 1040 ez See Sales Caused by Weather-Related Conditions in chapter 3. Irs forms 1040 ez 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. Irs forms 1040 ez Treat the loss as a loss from an involuntary conversion. Irs forms 1040 ez The loss equals the previously capitalized reforestation costs you had to duplicate on replanting. Irs forms 1040 ez You deduct the loss on the return for the year the seedlings died. Irs forms 1040 ez 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. Irs forms 1040 ez Your basis in the new property is generally the same as your adjusted basis in the property it replaces. Irs forms 1040 ez You must ordinarily report the gain on your stolen, destroyed, or other involuntarily converted property if you receive money or unlike property as reimbursement. Irs forms 1040 ez 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. Irs forms 1040 ez If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. Irs forms 1040 ez To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. Irs forms 1040 ez 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. Irs forms 1040 ez Example 1. Irs forms 1040 ez In 1985, you constructed a barn to store farm equipment at a cost of $20,000. Irs forms 1040 ez In 1987, you added a silo to the barn at a cost of $15,000 to store grain. Irs forms 1040 ez In May of this year, the property was worth $100,000. Irs forms 1040 ez In June the barn and silo were destroyed by a tornado. Irs forms 1040 ez At the time of the tornado, you had an adjusted basis of $0 in the property. Irs forms 1040 ez You received $85,000 from the insurance company. Irs forms 1040 ez You had a gain of $85,000 ($85,000 – $0). Irs forms 1040 ez You spent $80,000 to rebuild the barn and silo. Irs forms 1040 ez Since this is less than the insurance proceeds received, you must include $5,000 ($85,000 – $80,000) in your income. Irs forms 1040 ez Example 2. Irs forms 1040 ez In 1970, you bought a cabin in the mountains for your personal use at a cost of $18,000. Irs forms 1040 ez You made no further improvements or additions to it. Irs forms 1040 ez When a storm destroyed the cabin this January, the cabin was worth $250,000. Irs forms 1040 ez You received $146,000 from the insurance company in March. Irs forms 1040 ez You had a gain of $128,000 ($146,000 − $18,000). Irs forms 1040 ez You spent $144,000 to rebuild the cabin. Irs forms 1040 ez Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. Irs forms 1040 ez Buying replacement property from a related person. Irs forms 1040 ez   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). Irs forms 1040 ez This rule applies to the following taxpayers. Irs forms 1040 ez C corporations. Irs forms 1040 ez Partnerships in which more than 50% of the capital or profits interest is owned by C corporations. Irs forms 1040 ez 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. Irs forms 1040 ez 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. Irs forms 1040 ez If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Irs forms 1040 ez If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Irs forms 1040 ez Exception. Irs forms 1040 ez   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. Irs forms 1040 ez Related persons. Irs forms 1040 ez   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. Irs forms 1040 ez For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Irs forms 1040 ez Death of a taxpayer. Irs forms 1040 ez   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. Irs forms 1040 ez 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. Irs forms 1040 ez Replacement Property You must buy replacement property for the specific purpose of replacing your property. Irs forms 1040 ez Your replacement property must be similar or related in service or use to the property it replaces. Irs forms 1040 ez You do not have to use the same funds you receive as reimbursement for your old property to acquire the replacement property. Irs forms 1040 ez 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. Irs forms 1040 ez Property you acquire by gift or inheritance does not qualify as replacement property. Irs forms 1040 ez Owner-user. Irs forms 1040 ez   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. Irs forms 1040 ez 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. Irs forms 1040 ez A grinding mill that replaces a tractor does not qualify. Irs forms 1040 ez Neither does a breeding or draft animal that replaces a dairy cow. Irs forms 1040 ez Soil or other environmental contamination. Irs forms 1040 ez   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. Irs forms 1040 ez Weather-related conditions. Irs forms 1040 ez   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. Irs forms 1040 ez Example. Irs forms 1040 ez Each year you normally sell 25 cows from your beef herd. Irs forms 1040 ez However, this year you had to sell 50 cows. Irs forms 1040 ez 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. Irs forms 1040 ez 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. Irs forms 1040 ez Standing crop destroyed by casualty. Irs forms 1040 ez   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. Irs forms 1040 ez 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). Irs forms 1040 ez 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. Irs forms 1040 ez Timber loss. Irs forms 1040 ez   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. Irs forms 1040 ez If you bought the standing timber within the replacement period, you can postpone reporting the gain. Irs forms 1040 ez Business or income-producing property located in a federally declared disaster area. Irs forms 1040 ez   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. Irs forms 1040 ez For more information, see Disaster Area Losses in Publication 547. Irs forms 1040 ez Substituting replacement property. Irs forms 1040 ez   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. Irs forms 1040 ez This is true even if you acquire the other property within the replacement period. Irs forms 1040 ez 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. Irs forms 1040 ez Basis of replacement property. Irs forms 1040 ez   You must reduce the basis of your replacement property (its cost) by the amount of postponed gain. Irs forms 1040 ez In this way, tax on the gain is postponed until you dispose of the replacement property. Irs forms 1040 ez Replacement Period To postpone reporting your gain, you must buy replacement property within a specified period of time. Irs forms 1040 ez This is the replacement period. Irs forms 1040 ez The replacement period begins on the date your property was damaged, destroyed, stolen, sold, or exchanged. Irs forms 1040 ez 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. Irs forms 1040 ez Example. Irs forms 1040 ez You are a calendar year taxpayer. Irs forms 1040 ez While you were on vacation, farm equipment that cost $2,200 was stolen from your farm. Irs forms 1040 ez You discovered the theft when you returned to your farm on November 11, 2012. Irs forms 1040 ez Your insurance company investigated the theft and did not settle your claim until January 5, 2013, when they paid you $3,000. Irs forms 1040 ez You first realized a gain from the reimbursement for the theft during 2013, so you have until December 31, 2015, to replace the property. Irs forms 1040 ez Main home in disaster area. Irs forms 1040 ez   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. Irs forms 1040 ez See Disaster Area Losses , later. Irs forms 1040 ez Property in the Midwestern disaster areas. Irs forms 1040 ez   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. Irs forms 1040 ez This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Midwestern disaster areas. Irs forms 1040 ez Property in the Kansas disaster area. Irs forms 1040 ez   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. Irs forms 1040 ez This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Kansas disaster area. Irs forms 1040 ez Property in the Hurricane Katrina disaster area. Irs forms 1040 ez   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. Irs forms 1040 ez This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Irs forms 1040 ez Weather-related sales of livestock in an area eligible for federal assistance. Irs forms 1040 ez   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. Irs forms 1040 ez The IRS may extend the replacement period on a regional basis if the weather-related conditions continue for longer than 3 years. Irs forms 1040 ez   For information on extensions of the replacement period because of persistent drought, see Notice 2006-82, 2006-39 I. Irs forms 1040 ez R. Irs forms 1040 ez B. Irs forms 1040 ez 529, available at  www. Irs forms 1040 ez irs. Irs forms 1040 ez gov/irb/2006-39_IRB/ar11. Irs forms 1040 ez html. Irs forms 1040 ez 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. Irs forms 1040 ez gov. Irs forms 1040 ez Condemnation. Irs forms 1040 ez   The replacement period for a condemnation begins on the earlier of the following dates. Irs forms 1040 ez The date on which you disposed of the condemned property. Irs forms 1040 ez The date on which the threat of condemnation began. Irs forms 1040 ez 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. Irs forms 1040 ez 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. Irs forms 1040 ez Business or investment real property. Irs forms 1040 ez   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. Irs forms 1040 ez Extension. Irs forms 1040 ez   You can apply for an extension of the replacement period. Irs forms 1040 ez Send your written application to the Internal Revenue Service Center where you file your tax return. Irs forms 1040 ez See your tax return instructions for the address. Irs forms 1040 ez Include all the details about your need for an extension. Irs forms 1040 ez Make your application before the end of the replacement period. Irs forms 1040 ez 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. Irs forms 1040 ez You will get an extension of the replacement period if you can show reasonable cause for not making the replacement within the regular period. Irs forms 1040 ez How To Postpone Gain You postpone reporting your gain by reporting your choice on your tax return for the year you have the gain. Irs forms 1040 ez You have the gain in the year you receive insurance proceeds or other reimbursements that result in a gain. Irs forms 1040 ez Required statement. Irs forms 1040 ez   You should attach a statement to your return for the year you have the gain. Irs forms 1040 ez This statement should include all the following information. Irs forms 1040 ez The date and details of the casualty, theft, or other involuntary conversion. Irs forms 1040 ez The insurance or other reimbursement you received. Irs forms 1040 ez How you figured the gain. Irs forms 1040 ez Replacement property acquired before return filed. Irs forms 1040 ez   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. Irs forms 1040 ez The replacement property. Irs forms 1040 ez The postponed gain. Irs forms 1040 ez The basis adjustment that reflects the postponed gain. Irs forms 1040 ez Any gain you are reporting as income. Irs forms 1040 ez Replacement property acquired after return filed. Irs forms 1040 ez   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. Irs forms 1040 ez   You should then attach another statement to your return for the year in which you buy the replacement property. Irs forms 1040 ez This statement should contain detailed information on the replacement property. Irs forms 1040 ez 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. Irs forms 1040 ez Include in the statement detailed information on the replacement property bought in that year. Irs forms 1040 ez Reporting weather-related sales of livestock. Irs forms 1040 ez   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. Irs forms 1040 ez Evidence of the weather-related conditions that forced the sale or exchange of the livestock. Irs forms 1040 ez The gain realized on the sale or exchange. Irs forms 1040 ez The number and kind of livestock sold or exchanged. Irs forms 1040 ez The number of livestock of each kind you would have sold or exchanged under your usual business practice. Irs forms 1040 ez   Show all the following information and the preceding information on the return for the year in which you replace the livestock. Irs forms 1040 ez The dates you bought the replacement property. Irs forms 1040 ez The cost of the replacement property. Irs forms 1040 ez Description of the replacement property (for example, the number and kind of the replacement livestock). Irs forms 1040 ez Amended return. Irs forms 1040 ez   You must file an amended return (Form 1040X) for the tax year of the gain in either of the following situations. Irs forms 1040 ez You do not acquire replacement property within the replacement period, plus extensions. Irs forms 1040 ez On this amended return, you must report the gain and pay any additional tax due. Irs forms 1040 ez 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. Irs forms 1040 ez On this amended return, you must report the part of the gain that cannot be postponed and pay any additional tax due. Irs forms 1040 ez Disaster Area Losses Special rules apply to federally declared disaster area losses. Irs forms 1040 ez 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. Irs forms 1040 ez Stafford Disaster Relief and Emergency Assistance Act. Irs forms 1040 ez It includes a major disaster or emergency declaration under the act. Irs forms 1040 ez 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. Irs forms 1040 ez fema. Irs forms 1040 ez gov. Irs forms 1040 ez This part discusses the special rules for when to deduct a disaster area loss and what tax deadlines may be postponed. Irs forms 1040 ez For other special rules, see Disaster Area Losses in Publication 547. Irs forms 1040 ez When to deduct the loss. Irs forms 1040 ez   You generally must deduct a casualty loss in the year it occurred. Irs forms 1040 ez 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. Irs forms 1040 ez If you make this choice, the loss is treated as having occurred in the preceding year. Irs forms 1040 ez    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. Irs forms 1040 ez   You must make the choice to take your casualty loss for the disaster in the preceding year by the later of the following dates. Irs forms 1040 ez The due date (without extensions) for filing your tax return for the tax year in which the disaster actually occurred. Irs forms 1040 ez The due date (with extensions) for the return for the preceding tax year. Irs forms 1040 ez Federal disaster relief grants. Irs forms 1040 ez   Do not include post-disaster relief grants received under the Robert T. Irs forms 1040 ez 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. Irs forms 1040 ez Do not deduct casualty losses or medical expenses to the extent they are specifically reimbursed by these disaster relief grants. Irs forms 1040 ez 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. Irs forms 1040 ez Unemployment assistance payments under the Act are taxable unemployment compensation. Irs forms 1040 ez Qualified disaster relief payments. Irs forms 1040 ez   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. Irs forms 1040 ez These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Irs forms 1040 ez No withholding applies to these payments. Irs forms 1040 ez   Qualified disaster relief payments include payments you receive (regardless of the source) for the following expenses. Irs forms 1040 ez Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a federally declared disaster. Irs forms 1040 ez Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a federally declared disaster. Irs forms 1040 ez (A personal residence can be a rented residence or one you own. Irs forms 1040 ez ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a federally declared disaster. Irs forms 1040 ez   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. Irs forms 1040 ez    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. Irs forms 1040 ez Qualified disaster mitigation payments. Irs forms 1040 ez   Qualified disaster mitigation payments made under the Robert T. Irs forms 1040 ez 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. Irs forms 1040 ez These are payments you, as a property owner, receive to reduce the risk of future damage to your property. Irs forms 1040 ez You cannot increase your basis in property, or take a deduction or credit, for expenditures made with respect to those payments. Irs forms 1040 ez Sale of property under hazard mitigation program. Irs forms 1040 ez   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. Irs forms 1040 ez You report the gain or deduct the loss on your tax return for the year you realize it. Irs forms 1040 ez (You cannot deduct a loss on personal-use property unless the loss resulted from a casualty, as discussed earlier. Irs forms 1040 ez ) 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. Irs forms 1040 ez See Postponing Gain , earlier, for the rules that apply. Irs forms 1040 ez Other federal assistance programs. Irs forms 1040 ez    For more information about other federal assistance programs, see Crop Insurance and Crop Disaster Payments and Feed Assistance and Payments in chapter 3 earlier. Irs forms 1040 ez Postponed tax deadlines. Irs forms 1040 ez   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. Irs forms 1040 ez 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. Irs forms 1040 ez   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). Irs forms 1040 ez Go to http://www. Irs forms 1040 ez irs. Irs forms 1040 ez gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. Irs forms 1040 ez Who is eligible. Irs forms 1040 ez   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Irs forms 1040 ez Any individual whose main home is located in a covered disaster area (defined next). Irs forms 1040 ez Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. Irs forms 1040 ez Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered disaster area. Irs forms 1040 ez 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. Irs forms 1040 ez The main home or principal place of business does not have to be located in the covered disaster area. Irs forms 1040 ez 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. Irs forms 1040 ez The spouse on a joint return with a taxpayer who is eligible for postponements. Irs forms 1040 ez 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. Irs forms 1040 ez Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. Irs forms 1040 ez Any other person determined by the IRS to be affected by a federally declared disaster. Irs forms 1040 ez Covered disaster area. Irs forms 1040 ez   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. Irs forms 1040 ez Abatement of interest and penalties. Irs forms 1040 ez   The IRS may abate the interest and penalties on the underpaid income tax for the length of any postponement of tax deadlines. Irs forms 1040 ez 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. Irs forms 1040 ez Form 4684. Irs forms 1040 ez   Use this form to report your gains and losses from casualties and thefts. Irs forms 1040 ez Form 4797. Irs forms 1040 ez   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. Irs forms 1040 ez 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. Irs forms 1040 ez Form 8949. Irs forms 1040 ez   Use this form to report gain from an involuntary conversion (other than from casualty or theft) of personal-use property. Irs forms 1040 ez Schedule A (Form 1040). Irs forms 1040 ez   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. Irs forms 1040 ez Schedule D (Form 1040). Irs forms 1040 ez   Use this form to carry over the following gains. Irs forms 1040 ez Net gain shown on Form 4797 from an involuntary conversion of business property held for more than 1 year. Irs forms 1040 ez Net gain shown on Form 4684 from the casualty or theft of personal-use property. Irs forms 1040 ez    Also use this form to figure the overall gain or loss from transactions reported on Form 8949. Irs forms 1040 ez Schedule F (Form 1040). Irs forms 1040 ez   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. Irs forms 1040 ez Prev  Up  Next   Home   More Online Publications
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The Irs Forms 1040 Ez

Irs forms 1040 ez 2. Irs forms 1040 ez   Foreclosures and Repossessions Table of Contents Amount realized and ordinary income on a recourse debt. Irs forms 1040 ez Amount realized on a nonrecourse debt. Irs forms 1040 ez If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. Irs forms 1040 ez The foreclosure or repossession is treated as a sale from which you may realize gain or loss. Irs forms 1040 ez This is true even if you voluntarily return the property to the lender. Irs forms 1040 ez If the outstanding loan balance was more than the FMV of the property and the lender cancels all or part of the remaining loan balance, you also may realize ordinary income from the cancellation of debt. Irs forms 1040 ez You must report this income on your return unless certain exceptions or exclusions apply. Irs forms 1040 ez See chapter 1 for more details. Irs forms 1040 ez Borrower's gain or loss. Irs forms 1040 ez    You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale. Irs forms 1040 ez The gain is the difference between the amount realized and your adjusted basis in the transferred property (amount realized minus adjusted basis). Irs forms 1040 ez The loss is the difference between your adjusted basis in the transferred property and the amount realized (adjusted basis minus amount realized). Irs forms 1040 ez For more information on figuring gain or loss from the sale of property, see Gain or Loss From Sales and Exchanges in Publication 544. Irs forms 1040 ez You can use Table 1-1 to figure your ordinary income from the cancellation of debt and your gain or loss from a foreclosure or repossession. Irs forms 1040 ez Amount realized and ordinary income on a recourse debt. Irs forms 1040 ez    If you are personally liable for the debt, the amount realized on the foreclosure or repossession includes the smaller of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The FMV of the transferred property. Irs forms 1040 ez The amount realized also includes any proceeds you received from the foreclosure sale. Irs forms 1040 ez If the FMV of the transferred property is less than the total outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, the difference is ordinary income from the cancellation of debt. Irs forms 1040 ez You must report this income on your return unless certain exceptions or exclusions apply. Irs forms 1040 ez See chapter 1 for more details. Irs forms 1040 ez       Example 1. Irs forms 1040 ez Tara bought a new car for $15,000. Irs forms 1040 ez She made a $2,000 downpayment and borrowed the remaining $13,000 from the dealer's credit company. Irs forms 1040 ez Tara is personally liable for the loan (recourse debt) and the car is pledged as security for the loan. Irs forms 1040 ez On August 1, 2013, the credit company repossessed the car because Tara had stopped making loan payments. Irs forms 1040 ez The balance due after taking into account the payments Tara made was $10,000. Irs forms 1040 ez The FMV of the car when it was repossessed was $9,000. Irs forms 1040 ez On November 15, 2013, the credit company forgave the remaining $1,000 balance on the loan due to insufficient assets. Irs forms 1040 ez In this case, the amount Tara realizes is $9,000. Irs forms 1040 ez This is the smaller of: The $10,000 outstanding debt immediately before the repossession reduced by the $1,000 for which she remains personally liable immediately after the repossession ($10,000 − $1,000 = $9,000), or The $9,000 FMV of the car. Irs forms 1040 ez Tara figures her gain or loss on the repossession by comparing the $9,000 amount realized with her $15,000 adjusted basis. Irs forms 1040 ez She has a $6,000 nondeductible loss. Irs forms 1040 ez After the cancellation of the remaining balance on the loan in November, Tara also has ordinary income from cancellation of debt in the amount of $1,000 (the remaining balance on the $10,000 loan after the $9,000 amount satisfied by the FMV of the repossessed car). Irs forms 1040 ez Tara must report this $1,000 on her return unless one of the exceptions or exclusions described in chapter 1 applies. Irs forms 1040 ez Example 2. Irs forms 1040 ez Lili paid $200,000 for her home. Irs forms 1040 ez She made a $15,000 downpayment and borrowed the remaining $185,000 from a bank. Irs forms 1040 ez Lili is personally liable for the mortgage loan and the house secures the loan. Irs forms 1040 ez In 2013, the bank foreclosed on the mortgage because Lili stopped making payments. Irs forms 1040 ez When the bank foreclosed the mortgage, the balance due was $180,000, the FMV of the house was $170,000, and Lili's adjusted basis was $175,000 due to a casualty loss she had deducted. Irs forms 1040 ez At the time of the foreclosure, the bank forgave $2,000 of the $10,000 debt in excess of the FMV ($180,000 minus $170,000). Irs forms 1040 ez She remained personally liable for the $8,000 balance. Irs forms 1040 ez In this case, Lili has ordinary income from the cancellation of debt in the amount of $2,000. Irs forms 1040 ez The $2,000 income from the cancellation of debt is figured by subtracting the $170,000 FMV of the house from the $172,000 difference between her total outstanding debt immediately before the transfer of property and the amount for which she remains personally liable immediately after the transfer ($180,000 minus $8,000). Irs forms 1040 ez She is able to exclude the $2,000 of canceled debt from her income under the qualified principal residence indebtedness rules discussed earlier. Irs forms 1040 ez Lili must also determine her gain or loss from the foreclosure. Irs forms 1040 ez In this case, the amount that she realizes is $170,000. Irs forms 1040 ez This is the smaller of: (a) the $180,000 outstanding debt immediately before the transfer reduced by the $8,000 for which she remains personally liable immediately after the transfer ($180,000 − $8,000 = $172,000) or (b) the $170,000 FMV of the house. Irs forms 1040 ez Lili figures her gain or loss on the foreclosure by comparing the $170,000 amount realized with her $175,000 adjusted basis. Irs forms 1040 ez She has a $5,000 nondeductible loss. Irs forms 1040 ez Table 1-1. Irs forms 1040 ez Worksheet for Foreclosures and Repossessions Part 1. Irs forms 1040 ez Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Irs forms 1040 ez Otherwise, go to Part 2. Irs forms 1040 ez 1. Irs forms 1040 ez Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property   2. Irs forms 1040 ez Enter the fair market value of the transferred property   3. Irs forms 1040 ez Ordinary income from the cancellation of debt upon foreclosure or repossession. Irs forms 1040 ez * Subtract line 2 from line 1. Irs forms 1040 ez If less than zero, enter zero. Irs forms 1040 ez Next, go to Part 2   Part 2. Irs forms 1040 ez Gain or loss from foreclosure or repossession. Irs forms 1040 ez   4. Irs forms 1040 ez Enter the smaller of line 1 or line 2. Irs forms 1040 ez If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property   5. Irs forms 1040 ez Enter any proceeds you received from the foreclosure sale   6. Irs forms 1040 ez Add line 4 and line 5   7. Irs forms 1040 ez Enter the adjusted basis of the transferred property   8. Irs forms 1040 ez Gain or loss from foreclosure or repossession. Irs forms 1040 ez Subtract line 7 from line 6   * The income may not be taxable. Irs forms 1040 ez See chapter 1 for more details. Irs forms 1040 ez Amount realized on a nonrecourse debt. Irs forms 1040 ez    If you are not personally liable for repaying the debt secured by the transferred property, the amount you realize includes the full amount of the outstanding debt immediately before the transfer. Irs forms 1040 ez This is true even if the FMV of the property is less than the outstanding debt immediately before the transfer. Irs forms 1040 ez Example 1. Irs forms 1040 ez Tara bought a new car for $15,000. Irs forms 1040 ez She made a $2,000 downpayment and borrowed the remaining $13,000 from the dealer's credit company. Irs forms 1040 ez Tara is not personally liable for the loan (nonrecourse), but pledged the new car as security for the loan. Irs forms 1040 ez On August 1, 2013, the credit company repossessed the car because Tara had stopped making loan payments. Irs forms 1040 ez The balance due after taking into account the payments Tara made was $10,000. Irs forms 1040 ez The FMV of the car when it was repossessed was $9,000. Irs forms 1040 ez The amount Tara realized on the repossession is $10,000. Irs forms 1040 ez That is the outstanding amount of debt immediately before the repossession, even though the FMV of the car is less than $10,000. Irs forms 1040 ez Tara figures her gain or loss on the repossession by comparing the $10,000 amount realized with her $15,000 adjusted basis. Irs forms 1040 ez Tara has a $5,000 nondeductible loss. Irs forms 1040 ez Example 2. Irs forms 1040 ez Lili paid $200,000 for her home. Irs forms 1040 ez She made a $15,000 downpayment and borrowed the remaining $185,000 from a bank. Irs forms 1040 ez She is not personally liable for the loan, but grants the bank a mortgage. Irs forms 1040 ez The bank foreclosed on the mortgage because Lili stopped making payments. Irs forms 1040 ez When the bank foreclosed on the mortgage, the balance due was $180,000, the FMV of the house was $170,000, and Lili's adjusted basis was $175,000 due to a casualty loss she had deducted. Irs forms 1040 ez The amount Lili realized on the foreclosure is $180,000, the outstanding debt immediately before the foreclosure. Irs forms 1040 ez She figures her gain or loss by comparing the $180,000 amount realized with her $175,000 adjusted basis. Irs forms 1040 ez Lili has a $5,000 realized gain. Irs forms 1040 ez See Publication 523 to figure and report any taxable amount. Irs forms 1040 ez Forms 1099-A and 1099-C. Irs forms 1040 ez    A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A, Acquisition or Abandonment of Secured Property, showing information you need to figure your gain or loss. Irs forms 1040 ez However, if the lender also cancels part of your debt and must file Form 1099-C, the lender can include the information about the foreclosure or repossession on that form instead of on Form 1099-A. Irs forms 1040 ez The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Irs forms 1040 ez For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. Irs forms 1040 ez Prev  Up  Next   Home   More Online Publications