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Software For 1040nr

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Software For 1040nr

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

Government entity issuers of tax-exempt bonds affected by the severe storms and tornados occurring in parts of Oklahoma may qualify for additional time to file certain returns related to tax-exempt bonds, qualified tax credit bonds, and specified tax credit bonds.

Following recent disaster declarations for individual assistance issued by the Federal Emergency Management Agency, affected government entities in covered disaster areas in Oklahoma will receive filing and payment relief. 

Affected issuers who are required to file a Form 8038 series information return or a Form 8038-T in connection with an arbitrage payment, with a due date between May 18, 2013 and Sept. 29, 2013, may file such returns and make such payments on or before Sept. 30, 2013.

Affected issuers may also file such returns and make such payments on or before Sept. 30, 2013, if the records necessary to make such filing or payment, the conduit borrower, the bond counsel, or other professional upon whom the issuer relies to make such filing or payment are located in a covered disaster area.

The IRS will abate any late-filing penalty that would otherwise apply. The IRS automatically provides this relief to affected issuers located in covered disaster areas. Issuers need not contact the IRS to get this relief.  However, affected issuers should clearly indicate on the top of the return that such late filing or payment is the result of devastation caused by the severe storms and tornados in Oklahoma.

In addition, an affected issuer required to file a Form 8038 series information return or a Form 8038-T in connection with an arbitrage payment, due between May 18, 2013 and Sept. 29, 2013, may request authority to file a Form 8038 or Form 8038-T after Sept. 30, 2013, by requesting an extension under Revenue Procedures 2002-48 and 2005-40, which provide guidance on how issuers may request extensions of time to file Form 8038 series information returns and waivers of penalty associated with a late arbitrage payment.  Affected issuers should request relief in accordance with these revenue procedures and clearly indicate that such late filing or payment was the result of devastation caused by the severe storms and tornados in Oklahoma.

In addition, a Form 8038-CP authorized to be filed by an affected issuer between May 18, 2013 and Sept. 29, 2013, but filed thereafter, will be immediately processed upon receipt.

At this time, IRS relief for affected issuers applies to the following covered disaster areas in Oklahoma: Cleveland, Lincoln, McClain, Oklahoma and Pottawatomie counties.

Related Items:

IRS Gives Tax Relief to Oklahoma Tornado Victims; Return Filing and Tax Payment Deadlines Extended to Sept 30

Tax Relief for Victims of Severe Storms and Tornadoes in Oklahoma

Revenue Procedure 2007-56

Page Last Reviewed or Updated: 04-Sep-2013

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