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Taxact 2007

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Taxact 2007

Taxact 2007 Publication 526 - Main Content Table of Contents Organizations That Qualify To Receive Deductible ContributionsTypes of Qualified Organizations Contributions You Can DeductContributions From Which You Benefit Expenses Paid for Student Living With You Out-of-Pocket Expenses in Giving Services Expenses of Whaling Captains Contributions You Cannot DeductContributions to Individuals Contributions to Nonqualified Organizations Contributions From Which You Benefit Value of Time or Services Personal Expenses Appraisal Fees Contributions to Donor-Advised Funds Partial Interest in Property Contributions of PropertyContributions Subject to Special Rules Determining Fair Market Value Giving Property That Has Decreased in Value Giving Property That Has Increased in Value Penalty When To DeductChecks. Taxact 2007 Text message. Taxact 2007 Credit card. Taxact 2007 Pay-by-phone account. Taxact 2007 Stock certificate. Taxact 2007 Promissory note. Taxact 2007 Option. Taxact 2007 Borrowed funds. Taxact 2007 Conditional gift. Taxact 2007 Limits on Deductions50% Limit 30% Limit Special 30% Limit for Capital Gain Property 20% Limit Special 50% Limit for Qualified Conservation Contributions How To Figure Your Deduction When Limits Apply Records To KeepCash Contributions Noncash Contributions Out-of-Pocket Expenses How To ReportReporting expenses for student living with you. Taxact 2007 Total deduction over $500. Taxact 2007 Deduction over $5,000 for one item. Taxact 2007 Vehicle donations. Taxact 2007 Clothing and household items not in good used condition. Taxact 2007 Easement on building in historic district. Taxact 2007 Deduction over $500,000. Taxact 2007 How To Get Tax HelpLow Income Taxpayer Clinics Organizations That Qualify To Receive Deductible Contributions You can deduct your contributions only if you make them to a qualified organization. Taxact 2007 Most organizations, other than churches and governments, must apply to the IRS to become a qualified organization. Taxact 2007 How to check whether an organization can receive deductible charitable contributions. Taxact 2007   You can ask any organization whether it is a qualified organization, and most will be able to tell you. Taxact 2007 Or go to IRS. Taxact 2007 gov. Taxact 2007 Click on “Tools” and then on “Exempt Organizations Select Check” (www. Taxact 2007 irs. Taxact 2007 gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check). Taxact 2007 This online tool will enable you to search for qualified organizations. Taxact 2007 You can also call the IRS to find out if an organization is qualified. Taxact 2007 Call 1-877-829-5500. Taxact 2007 People who are deaf, hard of hearing, or have a speech disability and who have access to TTY/TDD equipment can call 1-800-829-4059. Taxact 2007 Deaf or hard of hearing individuals can also contact the IRS through relay services such as the Federal Relay Service at www. Taxact 2007 gsa. Taxact 2007 gov/fedrelay. Taxact 2007 Types of Qualified Organizations Generally, only the following types of organizations can be qualified organizations. Taxact 2007 A community chest, corporation, trust, fund, or foundation organized or created in or under the laws of the United States, any state, the District of Columbia, or any possession of the United States (including Puerto Rico). Taxact 2007 It must, however, be organized and operated only for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. Taxact 2007 Certain organizations that foster national or international amateur sports competition also qualify. Taxact 2007 War veterans' organizations, including posts, auxiliaries, trusts, or foundations, organized in the United States or any of its possessions (including Puerto Rico). Taxact 2007 Domestic fraternal societies, orders, and associations operating under the lodge system. Taxact 2007 (Your contribution to this type of organization is deductible only if it is to be used solely for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. Taxact 2007 ) Certain nonprofit cemetery companies or corporations. Taxact 2007 (Your contribution to this type of organization is not deductible if it can be used for the care of a specific lot or mausoleum crypt. Taxact 2007 ) The United States or any state, the District of Columbia, a U. Taxact 2007 S. Taxact 2007 possession (including Puerto Rico), a political subdivision of a state or U. Taxact 2007 S. Taxact 2007 possession, or an Indian tribal government or any of its subdivisions that perform substantial government functions. Taxact 2007 (Your contribution to this type of organization is deductible only if it is to be used solely for public purposes. Taxact 2007 ) Example 1. Taxact 2007 You contribute cash to your city's police department to be used as a reward for information about a crime. Taxact 2007 The city police department is a qualified organization, and your contribution is for a public purpose. Taxact 2007 You can deduct your contribution. Taxact 2007 Example 2. Taxact 2007 You make a voluntary contribution to the social security trust fund, not earmarked for a specific account. Taxact 2007 Because the trust fund is part of the U. Taxact 2007 S. Taxact 2007 Government, you contributed to a qualified organization. Taxact 2007 You can deduct your contribution. Taxact 2007 Examples. Taxact 2007   The following list gives some examples of qualified organizations. Taxact 2007 Churches, a convention or association of churches, temples, synagogues, mosques, and other religious organizations. Taxact 2007 Most nonprofit charitable organizations such as the American Red Cross and the United Way. Taxact 2007 Most nonprofit educational organizations, including the Boy Scouts of America, Girl Scouts of America, colleges, and museums. Taxact 2007 This also includes nonprofit daycare centers that provide childcare to the general public if substantially all the childcare is provided to enable parents and guardians to be gainfully employed. Taxact 2007 However, if your contribution is a substitute for tuition or other enrollment fee, it is not deductible as a charitable contribution, as explained later under Contributions You Cannot Deduct . Taxact 2007 Nonprofit hospitals and medical research organizations. Taxact 2007 Utility company emergency energy programs, if the utility company is an agent for a charitable organization that assists individuals with emergency energy needs. Taxact 2007 Nonprofit volunteer fire companies. Taxact 2007 Nonprofit organizations that develop and maintain public parks and recreation facilities. Taxact 2007 Civil defense organizations. Taxact 2007 Canadian charities. Taxact 2007   You may be able to deduct contributions to certain Canadian charitable organizations covered under an income tax treaty with Canada. Taxact 2007 To deduct your contribution to a Canadian charity, you generally must have income from sources in Canada. Taxact 2007 See Publication 597, Information on the United States-Canada Income Tax Treaty, for information on how to figure your deduction. Taxact 2007 Mexican charities. Taxact 2007   Under the U. Taxact 2007 S. Taxact 2007 -Mexico income tax treaty, a contribution to a Mexican charitable organization may be deductible, but only if and to the extent the contribution would have been treated as a charitable contribution to a public charity created or organized under U. Taxact 2007 S. Taxact 2007 law. Taxact 2007 To deduct your contribution to a Mexican charity, you must have income from sources in Mexico. Taxact 2007 The limits described in Limits on Deductions , later, apply and are figured using your income from Mexican sources. Taxact 2007 Israeli charities. Taxact 2007   Under the U. Taxact 2007 S. Taxact 2007 -Israel income tax treaty, a contribution to an Israeli charitable organization is deductible if and to the extent the contribution would have been treated as a charitable contribution if the organization had been created or organized under U. Taxact 2007 S. Taxact 2007 law. Taxact 2007 To deduct your contribution to an Israeli charity, you must have income from sources in Israel. Taxact 2007 The limits described in Limits on Deductions , later, apply. Taxact 2007 The deduction is also limited to 25% of your adjusted gross income from Israeli sources. Taxact 2007 Contributions You Can Deduct Generally, you can deduct contributions of money or property you make to, or for the use of, a qualified organization. Taxact 2007 A contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. Taxact 2007 The contributions must be made to a qualified organization and not set aside for use by a specific person. Taxact 2007 If you give property to a qualified organization, you generally can deduct the fair market value of the property at the time of the contribution. Taxact 2007 See Contributions of Property , later. Taxact 2007 Your deduction for charitable contributions generally cannot be more than 50% of your adjusted gross income (AGI), but in some cases 20% and 30% limits may apply. Taxact 2007 In addition, the total of your charitable contributions deduction and certain other itemized deductions may be limited. Taxact 2007 See Limits on Deductions , later. Taxact 2007 Table 1 in this publication gives examples of contributions you can and cannot deduct. Taxact 2007 Contributions From Which You Benefit If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive. Taxact 2007 Also see Contributions From Which You Benefit under Contributions You Cannot Deduct, later. Taxact 2007 If you pay more than fair market value to a qualified organization for goods or services, the excess may be a charitable contribution. Taxact 2007 For the excess amount to qualify, you must pay it with the intent to make a charitable contribution. Taxact 2007 Example 1. Taxact 2007 You pay $65 for a ticket to a dinner-dance at a church. Taxact 2007 Your entire $65 payment goes to the church. Taxact 2007 The ticket to the dinner-dance has a fair market value of $25. Taxact 2007 When you buy your ticket, you know its value is less than your payment. Taxact 2007 To figure the amount of your charitable contribution, subtract the value of the benefit you receive ($25) from your total payment ($65). Taxact 2007 You can deduct $40 as a charitable contribution to the church. Taxact 2007 Example 2. Taxact 2007 At a fundraising auction conducted by a charity, you pay $600 for a week's stay at a beach house. Taxact 2007 The amount you pay is no more than the fair rental value. Taxact 2007 You have not made a deductible charitable contribution. Taxact 2007 Athletic events. Taxact 2007   If you make a payment to, or for the benefit of, a college or university and, as a result, you receive the right to buy tickets to an athletic event in the athletic stadium of the college or university, you can deduct 80% of the payment as a charitable contribution. Taxact 2007   If any part of your payment is for tickets (rather than the right to buy tickets), that part is not deductible. Taxact 2007 Subtract the price of the tickets from your payment. Taxact 2007 You can deduct 80% of the remaining amount as a charitable contribution. Taxact 2007 Example 1. Taxact 2007 You pay $300 a year for membership in a university's athletic scholarship program. Taxact 2007 The only benefit of membership is that you have the right to buy one season ticket for a seat in a designated area of the stadium at the university's home football games. Taxact 2007 You can deduct $240 (80% of $300) as a charitable contribution. Taxact 2007 Example 2. Taxact 2007 The facts are the same as in Example 1 except your $300 payment includes the purchase of one season ticket for the stated ticket price of $120. Taxact 2007 You must subtract the usual price of a ticket ($120) from your $300 payment. Taxact 2007 The result is $180. Taxact 2007 Your deductible charitable contribution is $144 (80% of $180). Taxact 2007 Charity benefit events. Taxact 2007   If you pay a qualified organization more than fair market value for the right to attend a charity ball, banquet, show, sporting event, or other benefit event, you can deduct only the amount that is more than the value of the privileges or other benefits you receive. Taxact 2007   If there is an established charge for the event, that charge is the value of your benefit. Taxact 2007 If there is no established charge, the reasonable value of the right to attend the event is the value of your benefit. Taxact 2007 Whether you use the tickets or other privileges has no effect on the amount you can deduct. Taxact 2007 However, if you return the ticket to the qualified organization for resale, you can deduct the entire amount you paid for the ticket. Taxact 2007    Even if the ticket or other evidence of payment indicates that the payment is a “contribution,” this does not mean you can deduct the entire amount. Taxact 2007 If the ticket shows the price of admission and the amount of the contribution, you can deduct the contribution amount. Taxact 2007 Example. Taxact 2007 You pay $40 to see a special showing of a movie for the benefit of a qualified organization. Taxact 2007 Printed on the ticket is “Contribution–$40. Taxact 2007 ” If the regular price for the movie is $8, your contribution is $32 ($40 payment − $8 regular price). Taxact 2007 Membership fees or dues. Taxact 2007   You may be able to deduct membership fees or dues you pay to a qualified organization. Taxact 2007 However, you can deduct only the amount that is more than the value of the benefits you receive. Taxact 2007   You cannot deduct dues, fees, or assessments paid to country clubs and other social organizations. Taxact 2007 They are not qualified organizations. Taxact 2007 Certain membership benefits can be disregarded. Taxact 2007   Both you and the organization can disregard the following membership benefits if you get them in return for an annual payment of $75 or less. Taxact 2007 Any rights or privileges, other than those discussed under Athletic events , earlier, that you can use frequently while you are a member, such as: Free or discounted admission to the organization's facilities or events, Free or discounted parking, Preferred access to goods or services, and Discounts on the purchase of goods and services. Taxact 2007 Admission, while you are a member, to events open only to members of the organization if the organization reasonably projects that the cost per person (excluding any allocated overhead) is not more than $10. Taxact 2007 20. Taxact 2007 Token items. Taxact 2007   You do not have to reduce your contribution by the value of any benefit you receive if both of the following are true. Taxact 2007 You receive only a small item or other benefit of token value. Taxact 2007 The qualified organization correctly determines that the value of the item or benefit you received is not substantial and informs you that you can deduct your payment in full. Taxact 2007 The organization determines whether the value of an item or benefit is substantial by using Revenue Procedures 90-12 and 92-49 and the inflation adjustment in Revenue Procedure 2012–41. Taxact 2007 Written statement. Taxact 2007   A qualified organization must give you a written statement if you make a payment of more than $75 that is partly a contribution and partly for goods or services. Taxact 2007 The statement must say you can deduct only the amount of your payment that is more than the value of the goods or services you received. Taxact 2007 It must also give you a good faith estimate of the value of those goods or services. Taxact 2007   The organization can give you the statement either when it solicits or when it receives the payment from you. Taxact 2007 Exception. Taxact 2007   An organization will not have to give you this statement if one of the following is true. Taxact 2007 The organization is: A governmental organization described in (5) under Types of Qualified Organizations , earlier, or An organization formed only for religious purposes, and the only benefit you receive is an intangible religious benefit (such as admission to a religious ceremony) that generally is not sold in commercial transactions outside the donative context. Taxact 2007 You receive only items whose value is not substantial as described under Token items , earlier. Taxact 2007 You receive only membership benefits that can be disregarded, as described under Membership fees or dues , earlier. Taxact 2007 Expenses Paid for Student Living With You You may be able to deduct some expenses of having a student live with you. Taxact 2007 You can deduct qualifying expenses for a foreign or American student who: Lives in your home under a written agreement between you and a qualified organization (defined later) as part of a program of the organization to provide educational opportunities for the student, Is not your relative (defined later) or dependent (also defined later), and Is a full-time student in the twelfth or any lower grade at a school in the United States. Taxact 2007 You can deduct up to $50 a month for each full calendar month the student lives with you. Taxact 2007 Any month when conditions (1) through (3) above are met for 15 or more days counts as a full month. Taxact 2007 Qualified organization. Taxact 2007   For these purposes, a qualified organization can be any of the organizations described earlier under Types of Qualified Organizations , except those in (4) and (5). Taxact 2007 For example, if you are providing a home for a student as part of a state or local government program, you cannot deduct your expenses as charitable contributions. Taxact 2007 But see Foster parents under Out-of-Pocket Expenses in Giving Services, later, if you provide the home as a foster parent. Taxact 2007 Relative. Taxact 2007   The term “relative” means any of the following persons. Taxact 2007 Your child, stepchild, foster child, or a descendant of any of them (for example, your grandchild). Taxact 2007 A legally adopted child is considered your child. Taxact 2007 Your brother, sister, half brother, half sister, stepbrother, or stepsister. Taxact 2007 Your father, mother, grandparent, or other direct ancestor. Taxact 2007 Your stepfather or stepmother. Taxact 2007 A son or daughter of your brother or sister. Taxact 2007 A brother or sister of your father or mother. Taxact 2007 Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Taxact 2007 Dependent. Taxact 2007   For this purpose, the term “dependent” means: A person you can claim as a dependent, or A person you could have claimed as a dependent except that: He or she received gross income of $3,900 or more, He or she filed a joint return, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Taxact 2007    Foreign students brought to this country under a qualified international education exchange program and placed in American homes for a temporary period generally are not U. Taxact 2007 S. Taxact 2007 residents and cannot be claimed as dependents. Taxact 2007 Qualifying expenses. Taxact 2007   You may be able to deduct the cost of books, tuition, food, clothing, transportation, medical and dental care, entertainment, and other amounts you actually spend for the well-being of the student. Taxact 2007 Expenses that do not qualify. Taxact 2007   You cannot deduct depreciation on your home, the fair market value of lodging, and similar items not considered amounts actually spent by you. Taxact 2007 Nor can you deduct general household expenses, such as taxes, insurance, and repairs. Taxact 2007 Reimbursed expenses. Taxact 2007   In most cases, you cannot claim a charitable contribution deduction if you are compensated or reimbursed for any part of the costs of having a student live with you. Taxact 2007 However, you may be able to claim a charitable contribution deduction for the unreimbursed portion of your expenses if you are reimbursed only for an extraordinary or one-time item, such as a hospital bill or vacation trip, you paid in advance at the request of the student's parents or the sponsoring organization. Taxact 2007 Mutual exchange program. Taxact 2007   You cannot deduct the costs of a foreign student living in your home under a mutual exchange program through which your child will live with a family in a foreign country. Taxact 2007 Reporting expenses. Taxact 2007   For a list of what you must file with your return if you deduct expenses for a student living with you, see Reporting expenses for student living with you under How To Report, later. Taxact 2007 Out-of-Pocket Expenses in Giving Services Table 2. Taxact 2007 Volunteers' Questions and Answers If you volunteer for a qualified organization, the following questions and answers may apply to you. Taxact 2007 All of the rules explained in this publication also apply. Taxact 2007 See, in particular, Out-of-Pocket Expenses in Giving Services . Taxact 2007 Question Answer I volunteer 6 hours a week in the office of a qualified organization. Taxact 2007 The receptionist is paid $10 an hour for the same work. Taxact 2007 Can I deduct $60 a week for my time? No, you cannot deduct the value of your time or services. Taxact 2007  The office is 30 miles from my home. Taxact 2007 Can I deduct any of my car expenses for these trips? Yes, you can deduct the costs of gas and oil that are directly related to getting to and from the place where you volunteer. Taxact 2007 If you do not want to figure your actual costs, you can deduct 14 cents for each mile. Taxact 2007 I volunteer as a Red Cross nurse's aide at a hospital. Taxact 2007 Can I deduct the cost of the uniforms I must wear? Yes, you can deduct the cost of buying and cleaning your uniforms if the hospital is a qualified organization, the uniforms are not suitable for everyday use, and you must wear them when volunteering. Taxact 2007 I pay a babysitter to watch my children while I volunteer for a qualified organization. Taxact 2007 Can I deduct these costs? No, you cannot deduct payments for childcare expenses as a charitable contribution, even if you would be unable to volunteer without childcare. Taxact 2007 (If you have childcare expenses so you can work for pay, see Publication 503, Child and Dependent Care Expenses. Taxact 2007 ) Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. Taxact 2007 The amounts must be: Unreimbursed, Directly connected with the services, Expenses you had only because of the services you gave, and Not personal, living, or family expenses. Taxact 2007 Table 2 contains questions and answers that apply to some individuals who volunteer their services. Taxact 2007 Underprivileged youths selected by charity. Taxact 2007   You can deduct reasonable unreimbursed out-of-pocket expenses you pay to allow underprivileged youths to attend athletic events, movies, or dinners. Taxact 2007 The youths must be selected by a charitable organization whose goal is to reduce juvenile delinquency. Taxact 2007 Your own similar expenses in accompanying the youths are not deductible. Taxact 2007 Conventions. Taxact 2007   If a qualified organization selects you to attend a convention as its representative, you can deduct your unreimbursed expenses for travel, including reasonable amounts for meals and lodging, while away from home overnight for the convention. Taxact 2007 However, see Travel , later. Taxact 2007   You cannot deduct personal expenses for sightseeing, fishing parties, theater tickets, or nightclubs. Taxact 2007 You also cannot deduct travel, meals and lodging, and other expenses for your spouse or children. Taxact 2007   You cannot deduct your travel expenses in attending a church convention if you go only as a member of your church rather than as a chosen representative. Taxact 2007 You can, however, deduct unreimbursed expenses that are directly connected with giving services for your church during the convention. Taxact 2007 Uniforms. Taxact 2007   You can deduct the cost and upkeep of uniforms that are not suitable for everyday use and that you must wear while performing donated services for a charitable organization. Taxact 2007 Foster parents. Taxact 2007   You may be able to deduct as a charitable contribution some of the costs of being a foster parent (foster care provider) if you have no profit motive in providing the foster care and are not, in fact, making a profit. Taxact 2007 A qualified organization must select the individuals you take into your home for foster care. Taxact 2007   You can deduct expenses that meet both of the following requirements. Taxact 2007 They are unreimbursed out-of-pocket expenses to feed, clothe, and care for the foster child. Taxact 2007 They are incurred primarily to benefit the qualified organization. Taxact 2007   Unreimbursed expenses that you cannot deduct as charitable contributions may be considered support provided by you in determining whether you can claim the foster child as a dependent. Taxact 2007 For details, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Taxact 2007 Example. Taxact 2007 You cared for a foster child because you wanted to adopt her, not to benefit the agency that placed her in your home. Taxact 2007 Your unreimbursed expenses are not deductible as charitable contributions. Taxact 2007 Church deacon. Taxact 2007   You can deduct as a charitable contribution any unreimbursed expenses you have while in a permanent diaconate program established by your church. Taxact 2007 These expenses include the cost of vestments, books, and transportation required in order to serve in the program as either a deacon candidate or an ordained deacon. Taxact 2007 Car expenses. Taxact 2007   You can deduct as a charitable contribution any unreimbursed out-of-pocket expenses, such as the cost of gas and oil, directly related to the use of your car in giving services to a charitable organization. Taxact 2007 You cannot deduct general repair and maintenance expenses, depreciation, registration fees, or the costs of tires or insurance. Taxact 2007   If you do not want to deduct your actual expenses, you can use a standard mileage rate of 14 cents a mile to figure your contribution. Taxact 2007   You can deduct parking fees and tolls whether you use your actual expenses or the standard mileage rate. Taxact 2007   You must keep reliable written records of your car expenses. Taxact 2007 For more information, see Car expenses under Records To Keep, later. Taxact 2007 Travel. Taxact 2007   Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. Taxact 2007 This applies whether you pay the expenses directly or indirectly. Taxact 2007 You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses. Taxact 2007   The deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. Taxact 2007 Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. Taxact 2007 However, if you have only nominal duties, or if for significant parts of the trip you do not have any duties, you cannot deduct your travel expenses. Taxact 2007 Example 1. Taxact 2007 You are a troop leader for a tax-exempt youth group and you take the group on a camping trip. Taxact 2007 You are responsible for overseeing the setup of the camp and for providing adult supervision for other activities during the entire trip. Taxact 2007 You participate in the activities of the group and enjoy your time with them. Taxact 2007 You oversee the breaking of camp and you transport the group home. Taxact 2007 You can deduct your travel expenses. Taxact 2007 Example 2. Taxact 2007 You sail from one island to another and spend 8 hours a day counting whales and other forms of marine life. Taxact 2007 The project is sponsored by a charitable organization. Taxact 2007 In most circumstances, you cannot deduct your expenses. Taxact 2007 Example 3. Taxact 2007 You work for several hours each morning on an archeological dig sponsored by a charitable organization. Taxact 2007 The rest of the day is free for recreation and sightseeing. Taxact 2007 You cannot take a charitable contribution deduction even though you work very hard during those few hours. Taxact 2007 Example 4. Taxact 2007 You spend the entire day attending a charitable organization's regional meeting as a chosen representative. Taxact 2007 In the evening you go to the theater. Taxact 2007 You can claim your travel expenses as charitable contributions, but you cannot claim the cost of your evening at the theater. Taxact 2007 Daily allowance (per diem). Taxact 2007   If you provide services for a charitable organization and receive a daily allowance to cover reasonable travel expenses, including meals and lodging while away from home overnight, you must include in income any part of the allowance that is more than your deductible travel expenses. Taxact 2007 You may be able to deduct any necessary travel expenses that are more than the allowance. Taxact 2007 Deductible travel expenses. Taxact 2007   These include: Air, rail, and bus transportation, Out-of-pocket expenses for your car, Taxi fares or other costs of transportation between the airport or station and your hotel, Lodging costs, and The cost of meals. Taxact 2007 Because these travel expenses are not business-related, they are not subject to the same limits as business related expenses. Taxact 2007 For information on business travel expenses, see Travel in Publication 463, Travel, Entertainment, Gift, and Car Expenses. Taxact 2007 Expenses of Whaling Captains You may be able to deduct as a charitable contribution any reasonable and necessary whaling expenses you pay during the year to carry out sanctioned whaling activities. Taxact 2007 The deduction is limited to $10,000 a year. Taxact 2007 To claim the deduction, you must be recognized by the Alaska Eskimo Whaling Commission as a whaling captain charged with the responsibility of maintaining and carrying out sanctioned whaling activities. Taxact 2007 Sanctioned whaling activities are subsistence bowhead whale hunting activities conducted under the management plan of the Alaska Eskimo Whaling Commission. Taxact 2007 Whaling expenses include expenses for: Acquiring and maintaining whaling boats, weapons, and gear used in sanctioned whaling activities, Supplying food for the crew and other provisions for carrying out these activities, and Storing and distributing the catch from these activities. Taxact 2007 You must keep records showing the time, place, date, amount, and nature of the expenses. Taxact 2007 For details, see Revenue Procedure 2006-50, which is on page 944 of Internal Revenue Bulletin 2006-47 at www. Taxact 2007 irs. Taxact 2007 gov/pub/irs-irbs/irb06-47. Taxact 2007 pdf. Taxact 2007 Contributions You Cannot Deduct There are some contributions you cannot deduct and others you can deduct only in part. Taxact 2007 You cannot deduct as a charitable contribution: A contribution to a specific individual, A contribution to a nonqualified organization, The part of a contribution from which you receive or expect to receive a benefit, The value of your time or services, Your personal expenses, A qualified charitable distribution from an individual retirement arrangement (IRA), Appraisal fees, Certain contributions to donor-advised funds, or Certain contributions of partial interests in property. Taxact 2007 Detailed discussions of these items follow. Taxact 2007 Contributions to Individuals You cannot deduct contributions to specific individuals, including the following. Taxact 2007 Contributions to fraternal societies made for the purpose of paying medical or burial expenses of members. Taxact 2007 Contributions to individuals who are needy or worthy. Taxact 2007 You cannot deduct these contributions even if you make them to a qualified organization for the benefit of a specific person. Taxact 2007 But you can deduct a contribution to a qualified organization that helps needy or worthy individuals if you do not indicate that your contribution is for a specific person. Taxact 2007 Example. Taxact 2007 You can deduct contributions to a qualified organization for flood relief, hurricane relief, or other disaster relief. Taxact 2007 However, you cannot deduct contributions earmarked for relief of a particular individual or family. Taxact 2007 Payments to a member of the clergy that can be spent as he or she wishes, such as for personal expenses. Taxact 2007 Expenses you paid for another person who provided services to a qualified organization. Taxact 2007 Example. Taxact 2007 Your son does missionary work. Taxact 2007 You pay his expenses. Taxact 2007 You cannot claim a deduction for your son's unreimbursed expenses related to his contribution of services. Taxact 2007 Payments to a hospital that are for a specific patient's care or for services for a specific patient. Taxact 2007 You cannot deduct these payments even if the hospital is operated by a city, state, or other qualified organization. Taxact 2007 Contributions to Nonqualified Organizations You cannot deduct contributions to organizations that are not qualified to receive tax-deductible contributions, including the following. Taxact 2007 Certain state bar associations if: The bar is not a political subdivision of a state, The bar has private, as well as public, purposes, such as promoting the professional interests of members, and Your contribution is unrestricted and can be used for private purposes. Taxact 2007 Chambers of commerce and other business leagues or organizations. Taxact 2007 Civic leagues and associations. Taxact 2007 Communist organizations. Taxact 2007 Country clubs and other social clubs. Taxact 2007 Foreign organizations other than certain Canadian, Israeli, or Mexican charitable organizations. Taxact 2007 (See Canadian charities , Mexican charities , and Israeli charities under Organizations That Qualify To Receive Deductible Contributions, earlier. Taxact 2007 ) Also, you cannot deduct a contribution you made to any qualifying organization if the contribution is earmarked to go to a foreign organization. Taxact 2007 However, certain contributions to a qualified organization for use in a program conducted by a foreign charity may be deductible as long as they are not earmarked to go to the foreign charity. Taxact 2007 For the contribution to be deductible, the qualified organization must approve the program as furthering its own exempt purposes and must keep control over the use of the contributed funds. Taxact 2007 The contribution is also deductible if the foreign charity is only an administrative arm of the qualified organization. Taxact 2007 Homeowners' associations. Taxact 2007 Labor unions. Taxact 2007 But you may be able to deduct union dues as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit, on Schedule A (Form 1040). Taxact 2007 See Publication 529, Miscellaneous Deductions. Taxact 2007 Political organizations and candidates. Taxact 2007 Contributions From Which You Benefit If you receive or expect to receive a financial or economic benefit as a result of making a contribution to a qualified organization, you cannot deduct the part of the contribution that represents the value of the benefit you receive. Taxact 2007 See Contributions From Which You Benefit under Contributions You Can Deduct, earlier. Taxact 2007 These contributions include the following. Taxact 2007 Contributions for lobbying. Taxact 2007 This includes amounts you earmark for use in, or in connection with, influencing specific legislation. Taxact 2007 Contributions to a retirement home for room, board, maintenance, or admittance. Taxact 2007 Also, if the amount of your contribution depends on the type or size of apartment you will occupy, it is not a charitable contribution. Taxact 2007 Costs of raffles, bingo, lottery, etc. Taxact 2007 You cannot deduct as a charitable contribution amounts you pay to buy raffle or lottery tickets or to play bingo or other games of chance. Taxact 2007 For information on how to report gambling winnings and losses, see Deductions Not Subject to the 2% Limit in Publication 529. Taxact 2007 Dues to fraternal orders and similar groups. Taxact 2007 However, see Membership fees or dues under Contributions From Which You Benefit, earlier. Taxact 2007 Tuition, or amounts you pay instead of tuition. Taxact 2007 You cannot deduct as a charitable contribution amounts you pay as tuition even if you pay them for children to attend parochial schools or qualifying nonprofit daycare centers. Taxact 2007 You also cannot deduct any fixed amount you must pay in addition to, or instead of, tuition to enroll in a private school, even if it is designated as a “donation. Taxact 2007 ” Contributions connected with split-dollar insurance arrangements. Taxact 2007 You cannot deduct any part of a contribution to a charitable organization if, in connection with the contribution, the organization directly or indirectly pays, has paid, or is expected to pay any premium on any life insurance, annuity, or endowment contract for which you, any member of your family, or any other person chosen by you (other than a qualified charitable organization) is a beneficiary. Taxact 2007 Example. Taxact 2007 You donate money to a charitable organization. Taxact 2007 The charity uses the money to purchase a cash value life insurance policy. Taxact 2007 The beneficiaries under the insurance policy include members of your family. Taxact 2007 Even though the charity may eventually get some benefit out of the insurance policy, you cannot deduct any part of the donation. Taxact 2007 Qualified Charitable Distributions A qualified charitable distribution (QCD) is a distribution made directly by the trustee of your individual retirement arrangement (IRA), other than a SEP or SIMPLE IRA, to certain qualified organizations. Taxact 2007 You must have been at least age 70½ when the distribution was made. Taxact 2007 Your total QCDs for the year cannot be more than $100,000. Taxact 2007 If all the requirements are met, a QCD is nontaxable, but you cannot claim a charitable contribution deduction for a QCD. Taxact 2007 See Publication 590, Individual Retirement Arrangements (IRAs), for more information about QCDs. Taxact 2007 Value of Time or Services You cannot deduct the value of your time or services, including: Blood donations to the American Red Cross or to blood banks, and The value of income lost while you work as an unpaid volunteer for a qualified organization. Taxact 2007 Personal Expenses You cannot deduct personal, living, or family expenses, such as the following items. Taxact 2007 The cost of meals you eat while you perform services for a qualified organization, unless it is necessary for you to be away from home overnight while performing the services. Taxact 2007 Adoption expenses, including fees paid to an adoption agency and the costs of keeping a child in your home before adoption is final. Taxact 2007 However, you may be able to claim a tax credit for these expenses. Taxact 2007 Also, you may be able to exclude from your gross income amounts paid or reimbursed by your employer for your adoption expenses. Taxact 2007 See Form 8839, Qualified Adoption Expenses, and its instructions, for more information. Taxact 2007 You also may be able to claim an exemption for the child. Taxact 2007 See Exemptions for Dependents in Publication 501 for more information. Taxact 2007 Appraisal Fees You cannot deduct as a charitable contribution any fees you pay to find the fair market value of donated property. Taxact 2007 But you can claim them, subject to the 2%-of-adjusted-gross-income limit, as a miscellaneous itemized deduction on Schedule A (Form 1040). Taxact 2007 See Deductions Subject to the 2% Limit in Publication 529 for more information. Taxact 2007 Contributions to Donor-Advised Funds You cannot deduct a contribution to a donor-advised fund if: The qualified organization that sponsors the fund is a war veterans' organization, a fraternal society, or a nonprofit cemetery company, or You do not have an acknowledgment from that sponsoring organization that it has exclusive legal control over the assets contributed. Taxact 2007 There are also other circumstances in which you cannot deduct your contribution to a donor-advised fund. Taxact 2007 Generally, a donor-advised fund is a fund or account in which a donor can, because of being a donor, advise the fund how to distribute or invest amounts held in the fund. Taxact 2007 For details, see Internal Revenue Code section 170(f)(18). Taxact 2007 Partial Interest in Property Generally, you cannot deduct a contribution of less than your entire interest in property. Taxact 2007 For details, see Partial Interest in Property under Contributions of Property, later. Taxact 2007 Contributions of Property If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. Taxact 2007 However, if the property has increased in value, you may have to make some adjustments to the amount of your deduction. Taxact 2007 See Giving Property That Has Increased in Value , later. Taxact 2007 For information about the records you must keep and the information you must furnish with your return if you donate property, see Records To Keep and How To Report , later. Taxact 2007 Contributions Subject to Special Rules Special rules apply if you contribute: Clothing or household items, A car, boat, or airplane, Taxidermy property, Property subject to a debt, A partial interest in property, A fractional interest in tangible personal property, A qualified conservation contribution, A future interest in tangible personal property, Inventory from your business, or A patent or other intellectual property. Taxact 2007 These special rules are described next. Taxact 2007 Clothing and Household Items You cannot take a deduction for clothing or household items you donate unless the clothing or household items are in good used condition or better. Taxact 2007 Exception. Taxact 2007   You can take a deduction for a contribution of an item of clothing or a household item that is not in good used condition or better if you deduct more than $500 for it and include a qualified appraisal of it with your return. Taxact 2007 Household items. Taxact 2007   Household items include: Furniture and furnishings, Electronics, Appliances, Linens, and Other similar items. Taxact 2007   Household items do not include: Food, Paintings, antiques, and other objects of art, Jewelry and gems, and Collections. Taxact 2007 Fair market value. Taxact 2007   To determine the fair market value of these items, use the rules under Determining Fair Market Value , later. Taxact 2007 Cars, Boats, and Airplanes The following rules apply to any donation of a qualified vehicle. Taxact 2007 A qualified vehicle is: A car or any motor vehicle manufactured mainly for use on public streets, roads, and highways, A boat, or An airplane. Taxact 2007 Deduction more than $500. Taxact 2007   If you donate a qualified vehicle with a claimed fair market value of more than $500, you can deduct the smaller of: The gross proceeds from the sale of the vehicle by the organization, or The vehicle's fair market value on the date of the contribution. Taxact 2007 If the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to figure the deductible amount, as described under Giving Property That Has Increased in Value , later. Taxact 2007 Form 1098-C. Taxact 2007   You must attach to your return Copy B of the Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, (or other statement containing the same information as Form 1098-C) you received from the organization. Taxact 2007 The Form 1098-C (or other statement) will show the gross proceeds from the sale of the vehicle. Taxact 2007   If you e-file your return, you must: Attach Copy B of Form 1098-C to Form 8453, U. Taxact 2007 S. Taxact 2007 Individual Income Tax Transmittal for an IRS e-file Return, and mail the forms to the IRS, or Include Copy B of Form 1098-C as a pdf attachment if your software program allows it. Taxact 2007   If you do not attach Form 1098-C (or other statement), you cannot deduct your contribution. Taxact 2007    You must get Form 1098-C (or other statement) within 30 days of the sale of the vehicle. Taxact 2007 But if exception 1 or 2 (described later) applies, you must get Form 1098-C (or other statement) within 30 days of your donation. Taxact 2007 Filing deadline approaching and still no Form 1098-C. Taxact 2007   If the filing deadline is approaching and you still do not have a Form 1098-C, you have two choices. Taxact 2007 Request an automatic 6-month extension of time to file your return. Taxact 2007 You can get this extension by filing Form 4868, Application for Automatic Extension of Time To File U. Taxact 2007 S. Taxact 2007 Individual Income Tax Return. Taxact 2007 For more information, see the instructions for Form 4868. Taxact 2007 File the return on time without claiming the deduction for the qualified vehicle. Taxact 2007 After receiving the Form 1098-C, file an amended return, Form 1040X, Amended U. Taxact 2007 S. Taxact 2007 Individual Income Tax Return, claiming the deduction. Taxact 2007 Attach Copy B of Form 1098-C (or other statement) to the amended return. Taxact 2007 Exceptions. Taxact 2007   There are two exceptions to the rules just described for deductions of more than $500. Taxact 2007 Exception 1—vehicle used or improved by organization. Taxact 2007   If the qualified organization makes a significant intervening use of or material improvement to the vehicle before transferring it, you generally can deduct the vehicle's fair market value at the time of the contribution. Taxact 2007 But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. Taxact 2007 The Form 1098-C (or other statement) will show whether this exception applies. Taxact 2007    Exception 2—vehicle given or sold to needy individual. Taxact 2007   If the qualified organization will give the vehicle, or sell it for a price well below fair market value, to a needy individual to further the organization's charitable purpose, you generally can deduct the vehicle's fair market value at the time of the contribution. Taxact 2007 But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. Taxact 2007 The Form 1098-C (or other statement) will show whether this exception applies. Taxact 2007   This exception does not apply if the organization sells the vehicle at auction. Taxact 2007 In that case, you cannot deduct the vehicle's fair market value. Taxact 2007 Example. Taxact 2007 Anita donates a used car to a qualified organization. Taxact 2007 She bought it 3 years ago for $9,000. Taxact 2007 A used car guide shows the fair market value for this type of car is $6,000. Taxact 2007 However, Anita gets a Form 1098-C from the organization showing the car was sold for $2,900. Taxact 2007 Neither exception 1 nor exception 2 applies. Taxact 2007 If Anita itemizes her deductions, she can deduct $2,900 for her donation. Taxact 2007 She must attach Form 1098-C and Form 8283 to her return. Taxact 2007 Deduction $500 or less. Taxact 2007   If the qualified organization sells the vehicle for $500 or less and exceptions 1 and 2 do not apply, you can deduct the smaller of: $500, or The vehicle's fair market value on the date of the contribution. Taxact 2007 But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. Taxact 2007   If the vehicle's fair market value is at least $250 but not more than $500, you must have a written statement from the qualified organization acknowledging your donation. Taxact 2007 The statement must contain the information and meet the tests for an acknowledgment described under Contributions of $250 or More under Records To Keep, later. Taxact 2007 Fair market value. Taxact 2007   To determine a vehicle's fair market value, use the rules described under Determining Fair Market Value , later. Taxact 2007 Donations of inventory. Taxact 2007   The vehicle donation rules just described do not apply to donations of inventory. Taxact 2007 For example, these rules do not apply if you are a car dealer who donates a car you had been holding for sale to customers. Taxact 2007 See Inventory , later. Taxact 2007 Taxidermy Property If you donate taxidermy property to a qualified organization, your deduction is limited to your basis in the property or its fair market value, whichever is less. Taxact 2007 This applies if you prepared, stuffed, or mounted the property or paid or incurred the cost of preparing, stuffing, or mounting the property. Taxact 2007 Your basis for this purpose includes only the cost of preparing, stuffing, and mounting the property. Taxact 2007 Your basis does not include transportation or travel costs. Taxact 2007 It also does not include the direct or indirect costs for hunting or killing an animal, such as equipment costs. Taxact 2007 In addition, it does not include the value of your time. Taxact 2007 Taxidermy property means any work of art that: Is the reproduction or preservation of an animal, in whole or in part, Is prepared, stuffed, or mounted to recreate one or more characteristics of the animal, and Contains a part of the body of the dead animal. Taxact 2007 Property Subject to a Debt If you contribute property subject to a debt (such as a mortgage), you must reduce the fair market value of the property by: Any allowable deduction for interest you paid (or will pay) that is attributable to any period after the contribution, and If the property is a bond, the lesser of: Any allowable deduction for interest you paid (or will pay) to buy or carry the bond that is attributable to any period before the contribution, or The interest, including bond discount, receivable on the bond that is attributable to any period before the contribution, and that is not includible in your income due to your accounting method. Taxact 2007 This prevents you from deducting the same amount as both investment interest and a charitable contribution. Taxact 2007 If the recipient (or another person) assumes the debt, you must also reduce the fair market value of the property by the amount of the outstanding debt assumed. Taxact 2007 The amount of the debt is also treated as an amount realized on the sale or exchange of property for purposes of figuring your taxable gain (if any). Taxact 2007 For more information, see Bargain Sales under Giving Property That Has Increased in Value, later. Taxact 2007 Partial Interest in Property Generally, you cannot deduct a charitable contribution of less than your entire interest in property. Taxact 2007 Right to use property. Taxact 2007   A contribution of the right to use property is a contribution of less than your entire interest in that property and is not deductible. Taxact 2007 Example 1. Taxact 2007 You own a 10-story office building and donate rent-free use of the top floor to a charitable organization. Taxact 2007 Because you still own the building, you have contributed a partial interest in the property and cannot take a deduction for the contribution. Taxact 2007 Example 2. Taxact 2007 Mandy White owns a vacation home at the beach that she sometimes rents to others. Taxact 2007 For a fund-raising auction at her church, she donated the right to use the vacation home for 1 week. Taxact 2007 At the auction, the church received and accepted a bid from Lauren Green equal to the fair rental value of the home for 1 week. Taxact 2007 Mandy cannot claim a deduction because of the partial interest rule. Taxact 2007 Lauren cannot claim a deduction either, because she received a benefit equal to the amount of her payment. Taxact 2007 See Contributions From Which You Benefit , earlier. Taxact 2007 Exceptions. Taxact 2007   You can deduct a charitable contribution of a partial interest in property only if that interest represents one of the following items. Taxact 2007 A remainder interest in your personal home or farm. Taxact 2007 A remainder interest is one that passes to a beneficiary after the end of an earlier interest in the property. Taxact 2007 Example. Taxact 2007 You keep the right to live in your home during your lifetime and give your church a remainder interest that begins upon your death. Taxact 2007 You can deduct the value of the remainder interest. Taxact 2007 An undivided part of your entire interest. Taxact 2007 This must consist of a part of every substantial interest or right you own in the property and must last as long as your interest in the property lasts. Taxact 2007 But see Fractional Interest in Tangible Personal Property , later. Taxact 2007 Example. Taxact 2007 You contribute voting stock to a qualified organization but keep the right to vote the stock. Taxact 2007 The right to vote is a substantial right in the stock. Taxact 2007 You have not contributed an undivided part of your entire interest and cannot deduct your contribution. Taxact 2007 A partial interest that would be deductible if transferred to certain types of trusts. Taxact 2007 A qualified conservation contribution (defined later). Taxact 2007 For information about how to figure the value of a contribution of a partial interest in property, see Partial Interest in Property Not in Trust in Publication 561. Taxact 2007 Fractional Interest in Tangible Personal Property You cannot deduct a charitable contribution of a fractional interest in tangible personal property unless all interests in the property are held immediately before the contribution by: You, or You and the qualifying organization receiving the contribution. Taxact 2007 If you make an additional contribution later, the fair market value of that contribution will be determined by using the smaller of: The fair market value of the property at the time of the initial contribution, or The fair market value of the property at the time of the additional contribution. Taxact 2007 Tangible personal property is defined later under Future Interest in Tangible Personal Property . Taxact 2007 A fractional interest in property is an undivided portion of your entire interest in the property. Taxact 2007 Example. Taxact 2007 An undivided one-quarter interest in a painting that entitles an art museum to possession of the painting for 3 months of each year is a fractional interest in the property. Taxact 2007 Recapture of deduction. Taxact 2007   You must recapture your charitable contribution deduction by including it in your income if both of the following statements are true. Taxact 2007 You contributed a fractional interest in tangible personal property after August 17, 2006. Taxact 2007 You do not contribute the rest of your interests in the property to the original recipient or, if it no longer exists, another qualified organization on or before the earlier of: The date that is 10 years after the date of the initial contribution, or The date of your death. Taxact 2007   Recapture is also required if the qualified organization has not taken substantial physical possession of the property and used it in a way related to the organization's purpose during the period beginning on the date of the initial contribution and ending on the earlier of: The date that is 10 years after the date of the initial contribution, or The date of your death. Taxact 2007 Additional tax. Taxact 2007   If you must recapture your deduction, you must also pay interest and an additional tax equal to 10% of the amount recaptured. Taxact 2007 Qualified Conservation Contribution A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization to be used only for conservation purposes. Taxact 2007 Qualified organization. Taxact 2007   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charity, or An organization controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. Taxact 2007 The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. Taxact 2007   A publicly supported charity is an organization of the type described in (1) under Types of Qualified Organizations , earlier, that normally receives a substantial part of its support, other than income from its exempt activities, from direct or indirect contributions from the general public or from governmental units. Taxact 2007 Qualified real property interest. Taxact 2007   This is any of the following interests in real property. Taxact 2007 Your entire interest in real estate other than a mineral interest (subsurface oil, gas, or other minerals, and the right of access to these minerals). Taxact 2007 A remainder interest. Taxact 2007 A restriction (granted in perpetuity) on the use that may be made of the real property. Taxact 2007 Conservation purposes. Taxact 2007   Your contribution must be made only for one of the following conservation purposes. Taxact 2007 Preserving land areas for outdoor recreation by, or for the education of, the general public. Taxact 2007 Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. Taxact 2007 Preserving open space, including farmland and forest land, if it yields a significant public benefit. Taxact 2007 The open space must be preserved either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. Taxact 2007 Preserving a historically important land area or a certified historic structure. Taxact 2007 Building in registered historic district. Taxact 2007   If a building in a registered historic district is a certified historic structure, a contribution of a qualified real property interest that is an easement or other restriction on the exterior of the building is deductible only if it meets all of the following conditions. Taxact 2007 The restriction must preserve the entire exterior of the building (including its front, sides, rear, and height) and must prohibit any change to the exterior of the building that is inconsistent with its historical character. Taxact 2007 You and the organization receiving the contribution must enter into a written agreement certifying, under penalty of perjury, that the organization: Is a qualified organization with a purpose of environmental protection, land conservation, open space preservation, or historic preservation, and Has the resources to manage and enforce the restriction and a commitment to do so. Taxact 2007 You must include with your return: A qualified appraisal, Photographs of the building's entire exterior, and A description of all restrictions on development of the building, such as zoning laws and restrictive covenants. Taxact 2007   If you claimed the rehabilitation credit for the building for any of the 5 years before the year of the contribution, your charitable deduction is reduced. Taxact 2007 For more information, see Form 3468, Investment Credit, and Internal Revenue Code section 170(f)(14). Taxact 2007   If you claim a deduction of more than $10,000, your deduction will not be allowed unless you pay a $500 filing fee. Taxact 2007 See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. Taxact 2007 You may be able to deduct the filing fee as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit, on Schedule A (Form 1040). Taxact 2007 See Deductions Subject to the 2% Limit in Publication 529 for more information. Taxact 2007 More information. Taxact 2007   For information about determining the fair market value of qualified conservation contributions, see Publication 561. Taxact 2007 For information about the limits that apply to deductions for this type of contribution, see Limits on Deductions , later. Taxact 2007 For more information about qualified conservation contributions, see Regulations section 1. Taxact 2007 170A-14. Taxact 2007 Future Interest in Tangible Personal Property You cannot deduct the value of a charitable contribution of a future interest in tangible personal property until all intervening interests in and rights to the actual possession or enjoyment of the property have either expired or been turned over to someone other than yourself, a related person, or a related organization. Taxact 2007 But see Fractional Interest in Tangible Personal Property , earlier, and Tangible personal property put to unrelated use , later. Taxact 2007 Related persons include your spouse, children, grandchildren, brothers, sisters, and parents. Taxact 2007 Related organizations may include a partnership or corporation in which you have an interest, or an estate or trust with which you have a connection. Taxact 2007 Tangible personal property. Taxact 2007   This is any property, other than land or buildings, that can be seen or touched. Taxact 2007 It includes furniture, books, jewelry, paintings, and cars. Taxact 2007 Future interest. Taxact 2007   This is any interest that is to begin at some future time, regardless of whether it is designated as a future interest under state law. Taxact 2007 Example. Taxact 2007 You own an antique car that you contribute to a museum. Taxact 2007 You give up ownership, but retain the right to keep the car in your garage with your personal collection. Taxact 2007 Because you keep an interest in the property, you cannot deduct the contribution. Taxact 2007 If you turn the car over to the museum in a later year, giving up all rights to its use, possession, and enjoyment, you can take a deduction for the contribution in that later year. Taxact 2007 Inventory If you contribute inventory (property you sell in the course of your business), the amount you can deduct is the smaller of its fair market value on the day you contributed it or its basis. Taxact 2007 The basis of contributed inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. Taxact 2007 You must remove the amount of your charitable contribution deduction from your opening inventory. Taxact 2007 It is not part of the cost of goods sold. Taxact 2007 If the cost of donated inventory is not included in your opening inventory, the inventory's basis is zero and you cannot claim a charitable contribution deduction. Taxact 2007 Treat the inventory's cost as you would ordinarily treat it under your method of accounting. Taxact 2007 For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year. Taxact 2007 A special rule applies to certain donations of food inventory. Taxact 2007 See Food Inventory, later. Taxact 2007 Patents and Other Intellectual Property If you donate intellectual property to a qualified organization, your deduction is limited to the basis of the property or the fair market value of the property, whichever is smaller. Taxact 2007 Intellectual property means any of the following: Patents. Taxact 2007 Copyrights (other than a copyright described in Internal Revenue Code sections 1221(a)(3) or 1231(b)(1)(C)). Taxact 2007 Trademarks. Taxact 2007 Trade names. Taxact 2007 Trade secrets. Taxact 2007 Know-how. Taxact 2007 Software (other than software described in Internal Revenue Code section 197(e)(3)(A)(i)). Taxact 2007 Other similar property or applications or registrations of such property. Taxact 2007 Additional deduction based on income. Taxact 2007   You may be able to claim additional charitable contribution deductions in the year of the contribution and years following, based on the income, if any, from the donated property. Taxact 2007   The following table shows the percentage of income from the property that you can deduct for each of your tax years ending on or after the date of the contribution. Taxact 2007 In the table, “tax year 1,” for example, means your first tax year ending on or after the date of the contribution. Taxact 2007 However, you can take the additional deduction only to the extent the total of the amounts figured using this table is more than the amount of the deduction claimed for the original donation of the property. Taxact 2007   After the legal life of the intellectual property ends, or after the 10th anniversary of the donation, whichever is earlier, no additional deduction is allowed. Taxact 2007 The additional deductions cannot be taken for intellectual property donated to certain private foundations. Taxact 2007 Tax year Deductible percentage 1 100% 2 100% 3 90% 4 80% 5 70% 6 60% 7 50% 8 40% 9 30% 10 20% 11 10% 12 10% Reporting requirements. Taxact 2007   You must inform the organization at the time of the donation that you intend to treat the donation as a contribution subject to the provisions just discussed. Taxact 2007   The organization is required to file an information return showing the income from the property, with a copy to you. Taxact 2007 This is done on Form 8899, Notice of Income From Donated Intellectual Property. Taxact 2007 Determining Fair Market Value This section discusses general guidelines for determining the fair market value of various types of donated property. Taxact 2007 Publication 561 contains a more complete discussion. Taxact 2007 Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. Taxact 2007 Used clothing. Taxact 2007   The fair market value of used clothing and other personal items is usually far less than the price you paid for them. Taxact 2007 There are no fixed formulas or methods for finding the value of items of clothing. Taxact 2007   You should claim as the value the price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops. Taxact 2007      Also see Clothing and Household Items , earlier. Taxact 2007 Example. Taxact 2007    Kristin donated a coat to a thrift store operated by her church. Taxact 2007 She paid $300 for the coat 3 years ago. Taxact 2007 Similar coats in the thrift store sell for $50. Taxact 2007 The fair market value of the coat is $50. Taxact 2007 Kristin's donation is limited to $50. Taxact 2007 Household items. Taxact 2007   The fair market value of used household items, such as furniture, appliances, and linens, is usually much lower than the price paid when new. Taxact 2007 These items may have little or no market value because they are in a worn condition, out of style, or no longer useful. Taxact 2007 For these reasons, formulas (such as using a percentage of the cost to buy a new replacement item) are not acceptable in determining value. Taxact 2007   You should support your valuation with photographs, canceled checks, receipts from your purchase of the items, or other evidence. Taxact 2007 Magazine or newspaper articles and photographs that describe the items and statements by the recipients of the items are also useful. Taxact 2007 Do not include any of this evidence with your tax return. Taxact 2007   If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art in Publication 561. Taxact 2007   Also see Clothing and Household Items , earlier. Taxact 2007 Cars, boats, and airplanes. Taxact 2007   If you contribute a car, boat, or airplane to a charitable organization, you must determine its fair market value. Taxact 2007 Boats. Taxact 2007   Except for small, inexpensive boats, the valuation of boats should be based on an appraisal by a marine surveyor or appraiser because the physical condition is critical to the value. Taxact 2007 Cars. Taxact 2007   Certain commercial firms and trade organizations publish used car pricing guides, commonly called “blue books,” containing complete dealer sale prices or dealer average prices for recent model years. Taxact 2007 The guides may be published monthly or seasonally, and for different regions of the country. Taxact 2007 These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. Taxact 2007 The prices are not “official” and these publications are not considered an appraisal of any specific donated property. Taxact 2007 But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. Taxact 2007   These publications are sometimes available from public libraries, or from the loan officer at a bank, credit union, or finance company. Taxact 2007 You can also find used car pricing information on the Internet. Taxact 2007   To find the fair market value of a donated car, use the price listed in a used car guide for a private party sale, not the dealer retail value. Taxact 2007 However, the fair market value may be less if the car has engine trouble, body damage, high mileage, or any type of excessive wear. Taxact 2007 The fair market value of a donated car is the same as the price listed in a used car guide for a private party sale only if the guide lists a sales price for a car that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated car. Taxact 2007 Example. Taxact 2007 You donate a used car in poor condition to a local high school for use by students studying car repair. Taxact 2007 A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. Taxact 2007 However, the guide shows the price for a private party sale of the car is only $750. Taxact 2007 The fair market value of the car is considered to be $750. Taxact 2007 Large quantities. Taxact 2007   If you contribute a large number of the same item, fair market value is the price at which comparable numbers of the item are being sold. Taxact 2007 Example. Taxact 2007 You purchase 500 bibles for $1,000. Taxact 2007 The person who sells them to you says the retail value of these bibles is $3,000. Taxact 2007 If you contribute the bibles to a qualified organization, you can claim a deduction only for the price at which similar numbers of the same bible are currently being sold. Taxact 2007 Your charitable contribution is $1,000, unless you can show that similar numbers of that bible wer
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The Taxact 2007

Taxact 2007 Publication 547 - Main Content Table of Contents CasualtyFamily pet. Taxact 2007 Progressive deterioration. Taxact 2007 Special Procedure for Damage From Corrosive Drywall Theft Loss on Deposits Proof of Loss Figuring a LossGain from reimbursement. Taxact 2007 Business or income-producing property. Taxact 2007 Loss of inventory. Taxact 2007 Leased property. Taxact 2007 Exception for personal-use real property. Taxact 2007 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. Taxact 2007 Lessee's loss. Taxact 2007 Disaster Area LossesDisaster loss to inventory. Taxact 2007 Main home in disaster area. Taxact 2007 Unsafe home. Taxact 2007 Time limit for making choice. Taxact 2007 Revoking your choice. Taxact 2007 Figuring the loss deduction. Taxact 2007 How to report the loss on Form 1040X. Taxact 2007 Records. Taxact 2007 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. Taxact 2007 Property held more than 1 year. Taxact 2007 Depreciable property. Taxact 2007 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. Taxact 2007 A sudden event is one that is swift, not gradual or progressive. Taxact 2007 An unexpected event is one that is ordinarily unanticipated and unintended. Taxact 2007 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. Taxact 2007 Generally, casualty losses are deductible during the taxable year that the loss occurred. Taxact 2007 See Table 3, later. Taxact 2007 Deductible losses. Taxact 2007   Deductible casualty losses can result from a number of different causes, including the following. Taxact 2007 Car accidents (but see Nondeductible losses , next, for exceptions). Taxact 2007 Earthquakes. Taxact 2007 Fires (but see Nondeductible losses , next, for exceptions). Taxact 2007 Floods. Taxact 2007 Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses , later. Taxact 2007 Mine cave-ins. Taxact 2007 Shipwrecks. Taxact 2007 Sonic booms. Taxact 2007 Storms, including hurricanes and tornadoes. Taxact 2007 Terrorist attacks. Taxact 2007 Vandalism. Taxact 2007 Volcanic eruptions. Taxact 2007 Nondeductible losses. Taxact 2007   A casualty loss is not deductible if the damage or destruction is caused by the following. Taxact 2007 Accidentally breaking articles such as glassware or china under normal conditions. Taxact 2007 A family pet (explained below). Taxact 2007 A fire if you willfully set it, or pay someone else to set it. Taxact 2007 A car accident if your willful negligence or willful act caused it. Taxact 2007 The same is true if the willful act or willful negligence of someone acting for you caused the accident. Taxact 2007 Progressive deterioration (explained below). Taxact 2007 However, see Special Procedure for Damage From Corrosive Drywall , later. Taxact 2007 Family pet. Taxact 2007   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. Taxact 2007 Example. Taxact 2007 Your antique oriental rug was damaged by your new puppy before it was housebroken. Taxact 2007 Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. Taxact 2007 Progressive deterioration. Taxact 2007   Loss of property due to progressive deterioration is not deductible as a casualty loss. Taxact 2007 This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Taxact 2007 The following are examples of damage due to progressive deterioration. Taxact 2007 The steady weakening of a building due to normal wind and weather conditions. Taxact 2007 The deterioration and damage to a water heater that bursts. Taxact 2007 However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. Taxact 2007 Most losses of property caused by droughts. Taxact 2007 To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. Taxact 2007 Termite or moth damage. Taxact 2007 The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. Taxact 2007 However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. Taxact 2007 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. Taxact 2007 Under this procedure, you treat the amounts paid for repairs as a casualty loss in the year of payment. Taxact 2007 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. Taxact 2007 Note. Taxact 2007 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. Taxact 2007 S. Taxact 2007 Individual Income Tax Return, and attaching a completed Form 4684 for the appropriate year. Taxact 2007 Form 4684 for the appropriate year can be found at IRS. Taxact 2007 gov. Taxact 2007 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. Taxact 2007 Corrosive drywall. Taxact 2007   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. Taxact 2007 The revised identification guidance and remediation guidelines are available at www. Taxact 2007 cpsc. Taxact 2007 gov/Safety-Education/Safety-Education-Centers/Drywall. Taxact 2007 Special instructions for completing Form 4684. Taxact 2007   If you choose to follow this special procedure, complete Form 4684, Section A, according to the instructions below. Taxact 2007 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. Taxact 2007 Top margin of Form 4684. Taxact 2007   Enter “Revenue Procedure 2010-36”. Taxact 2007 Line 1. Taxact 2007   Enter the information required by the line 1 instructions. Taxact 2007 Line 2. Taxact 2007   Skip this line. Taxact 2007 Line 3. Taxact 2007   Enter the amount of insurance or other reimbursements you received (including through litigation). Taxact 2007 If none, enter -0-. Taxact 2007 Lines 4–7. Taxact 2007   Skip these lines. Taxact 2007 Line 8. Taxact 2007   Enter the amount you paid to repair the damage to your home and household appliances due to corrosive drywall. Taxact 2007 Enter only the amounts you paid to restore your home to the condition existing immediately before the damage. Taxact 2007 Do not enter any amounts you paid for improvements or additions that increased the value of your home above its pre-loss value. Taxact 2007 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). Taxact 2007 Line 9. Taxact 2007   If line 8 is more than line 3, do one of the following. Taxact 2007 If you have a pending claim for reimbursement (or you intend to pursue reimbursement), enter 75% of the difference between lines 3 and 8. Taxact 2007 If item (1) does not apply to you, enter the full amount of the difference between lines 3 and 8. Taxact 2007 If line 8 is less than or equal to line 3, you cannot claim a casualty loss deduction using this special procedure. Taxact 2007    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. Taxact 2007 See Reimbursement Received After Deducting Loss, later. Taxact 2007 Lines 10–18. Taxact 2007   Complete these lines according to the Instructions for Form 4684. Taxact 2007 Choosing not to follow this special procedure. Taxact 2007   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. Taxact 2007 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 . Taxact 2007 Furthermore, you must have proof that shows the following. Taxact 2007 The loss is properly deductible in the tax year you claimed it and not in some other year. Taxact 2007 See When To Report Gains and Losses , later. Taxact 2007 The amount of the claimed loss. Taxact 2007 See Proof of Loss , later. Taxact 2007 No claim for reimbursement of any portion of the loss exists for which there is a reasonable prospect of recovery. Taxact 2007 See When To Report Gains and Losses , later. Taxact 2007 Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. Taxact 2007 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. Taxact 2007 You do not need to show a conviction for theft. Taxact 2007 Theft includes the taking of money or property by the following means. Taxact 2007 Blackmail. Taxact 2007 Burglary. Taxact 2007 Embezzlement. Taxact 2007 Extortion. Taxact 2007 Kidnapping for ransom. Taxact 2007 Larceny. Taxact 2007 Robbery. Taxact 2007 The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Taxact 2007 Decline in market value of stock. Taxact 2007   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. Taxact 2007 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. Taxact 2007 You report a capital loss on Schedule D (Form 1040). Taxact 2007 For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Taxact 2007 Mislaid or lost property. Taxact 2007    The simple disappearance of money or property is not a theft. Taxact 2007 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. Taxact 2007 Sudden, unexpected, and unusual events were defined earlier under Casualty . Taxact 2007 Example. Taxact 2007 A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Taxact 2007 The diamond falls from the ring and is never found. Taxact 2007 The loss of the diamond is a casualty. Taxact 2007 Losses from Ponzi-type investment schemes. Taxact 2007   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. Taxact 2007 R. Taxact 2007 B. Taxact 2007 735 (available at www. Taxact 2007 irs. Taxact 2007 gov/irb/2009-14_IRB/ar07. Taxact 2007 html). Taxact 2007 Revenue Procedure 2009-20, 2009-14 I. Taxact 2007 R. Taxact 2007 B. Taxact 2007 749 (available at www. Taxact 2007 irs. Taxact 2007 gov/irb/2009-14_IRB/ar11. Taxact 2007 html). Taxact 2007 Revenue Procedure 2011-58, 2011-50 I. Taxact 2007 R. Taxact 2007 B. Taxact 2007 847 (available at www. Taxact 2007 irs. Taxact 2007 gov/irb/2011-50_IRB/ar11. Taxact 2007 html). Taxact 2007 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. Taxact 2007 Skip lines 19 to 27, but you must fill out Section B, lines 29 to 39, as appropriate. Taxact 2007 Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Taxact 2007 You do not need to complete Appendix A. Taxact 2007 For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. Taxact 2007   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. Taxact 2007 Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Taxact 2007 If you incurred this type of loss, you can choose one of the following ways to deduct the loss. Taxact 2007 As a casualty loss. Taxact 2007 As an ordinary loss. Taxact 2007 As a nonbusiness bad debt. Taxact 2007 Casualty loss or ordinary loss. Taxact 2007   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. Taxact 2007 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. Taxact 2007 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. Taxact 2007 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. Taxact 2007 Once you make the choice, you cannot change it without permission from the Internal Revenue Service. Taxact 2007   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Taxact 2007 The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. Taxact 2007 Your loss is subject to the 2%-of-adjusted-gross-income limit. Taxact 2007 You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. Taxact 2007 Nonbusiness bad debt. Taxact 2007   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. Taxact 2007 How to report. Taxact 2007   The kind of deduction you choose for your loss on deposits determines how you report your loss. Taxact 2007 See Table 1. Taxact 2007 More information. Taxact 2007   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684. Taxact 2007 Deducted loss recovered. Taxact 2007   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. Taxact 2007 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. Taxact 2007 For more information, see Recoveries in Publication 525. Taxact 2007 Proof of Loss To deduct a casualty or theft loss, you must be able to show that there was a casualty or theft. Taxact 2007 You also must be able to support the amount you take as a deduction. Taxact 2007 Casualty loss proof. Taxact 2007   For a casualty loss, you should be able to show all of the following. Taxact 2007 The type of casualty (car accident, fire, storm, etc. Taxact 2007 ) and when it occurred. Taxact 2007 That the loss was a direct result of the casualty. Taxact 2007 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. Taxact 2007 Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Taxact 2007 Theft loss proof. Taxact 2007   For a theft loss, you should be able to show all of the following. Taxact 2007 When you discovered that your property was missing. Taxact 2007 That your property was stolen. Taxact 2007 That you were the owner of the property. Taxact 2007 Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Taxact 2007    It is important that you have records that will prove your deduction. Taxact 2007 If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. Taxact 2007 Figuring a Loss To determine your deduction for a casualty or theft loss, you must first figure your loss. Taxact 2007 Table 1. Taxact 2007 Reporting Loss on Deposits IF you choose to report the loss as a(n). Taxact 2007 . Taxact 2007 . Taxact 2007   THEN report it on. Taxact 2007 . Taxact 2007 . Taxact 2007 casualty loss   Form 4684 and Schedule A  (Form 1040). Taxact 2007 ordinary loss   Schedule A (Form 1040). Taxact 2007 nonbusiness bad debt   Form 8949 and Schedule D (Form 1040). Taxact 2007 Amount of loss. Taxact 2007   Figure the amount of your loss using the following steps. Taxact 2007 Determine your adjusted basis in the property before the casualty or theft. Taxact 2007 Determine the decrease in fair market value (FMV) of the property as a result of the casualty or theft. Taxact 2007 From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. Taxact 2007 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. Taxact 2007 Gain from reimbursement. Taxact 2007   If your reimbursement is more than your adjusted basis in the property, you have a gain. Taxact 2007 This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. Taxact 2007 If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. Taxact 2007 See Figuring a Gain , later. Taxact 2007 Business or income-producing property. Taxact 2007   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. Taxact 2007 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. Taxact 2007   There are two ways you can deduct a casualty or theft loss of inventory, including items you hold for sale to customers. Taxact 2007   One way is to deduct the loss through the increase in the cost of goods sold by properly reporting your opening and closing inventories. Taxact 2007 Do not claim this loss again as a casualty or theft loss. Taxact 2007 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. Taxact 2007   The other way is to deduct the loss separately. Taxact 2007 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. Taxact 2007 Reduce the loss by the reimbursement you received. Taxact 2007 Do not include the reimbursement in gross income. Taxact 2007 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. Taxact 2007 Leased property. Taxact 2007   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. Taxact 2007 Separate computations. Taxact 2007   Generally, if a single casualty or theft involves more than one item of property, you must figure the loss on each item separately. Taxact 2007 Then combine the losses to determine the total loss from that casualty or theft. Taxact 2007 Exception for personal-use real property. Taxact 2007   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. Taxact 2007 Figure the loss using the smaller of the following. Taxact 2007 The decrease in FMV of the entire property. Taxact 2007 The adjusted basis of the entire property. Taxact 2007   See Real property under Figuring the Deduction, later. Taxact 2007 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. Taxact 2007 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. Taxact 2007 FMV of stolen property. Taxact 2007   The FMV of property immediately after a theft is considered to be zero because you no longer have the property. Taxact 2007 Example. Taxact 2007 Several years ago, you purchased silver dollars at face value for $150. Taxact 2007 This is your adjusted basis in the property. Taxact 2007 Your silver dollars were stolen this year. Taxact 2007 The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. Taxact 2007 Your theft loss is $150. Taxact 2007 Recovered stolen property. Taxact 2007   Recovered stolen property is your property that was stolen and later returned to you. Taxact 2007 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. Taxact 2007 Use this amount to refigure your total loss for the year in which the loss was deducted. Taxact 2007   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. Taxact 2007 But report the difference only up to the amount of the loss that reduced your tax. Taxact 2007 For more information on the amount to report, see Recoveries in Publication 525. Taxact 2007 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. Taxact 2007 However, other measures also can be used to establish certain decreases. Taxact 2007 See Appraisal and Cost of cleaning up or making repairs , next. Taxact 2007 Appraisal. Taxact 2007   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. Taxact 2007 The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Taxact 2007 This information is needed to limit any deduction to the actual loss resulting from damage to the property. Taxact 2007   Several factors are important in evaluating the accuracy of an appraisal, including the following. Taxact 2007 The appraiser's familiarity with your property before and after the casualty or theft. Taxact 2007 The appraiser's knowledge of sales of comparable property in the area. Taxact 2007 The appraiser's knowledge of conditions in the area of the casualty. Taxact 2007 The appraiser's method of appraisal. Taxact 2007 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. Taxact 2007 For more information on disasters, see Disaster Area Losses, later. Taxact 2007 Cost of cleaning up or making repairs. Taxact 2007   The cost of repairing damaged property is not part of a casualty loss. Taxact 2007 Neither is the cost of cleaning up after a casualty. Taxact 2007 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. Taxact 2007 The repairs are actually made. Taxact 2007 The repairs are necessary to bring the property back to its condition before the casualty. Taxact 2007 The amount spent for repairs is not excessive. Taxact 2007 The repairs take care of the damage only. Taxact 2007 The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Taxact 2007 Landscaping. Taxact 2007   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. Taxact 2007 You may be able to measure your loss by what you spend on the following. Taxact 2007 Removing destroyed or damaged trees and shrubs, minus any salvage you receive. Taxact 2007 Pruning and other measures taken to preserve damaged trees and shrubs. Taxact 2007 Replanting necessary to restore the property to its approximate value before the casualty. Taxact 2007 Car value. Taxact 2007   Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. Taxact 2007 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. Taxact 2007 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. Taxact 2007 If your car is not listed in the books, determine its value from other sources. Taxact 2007 A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. Taxact 2007 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. Taxact 2007 Cost of protection. Taxact 2007   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. Taxact 2007 The amount you spend on insurance or to board up your house against a storm is not part of your loss. Taxact 2007 If the property is business property, these expenses are deductible as business expenses. Taxact 2007   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. Taxact 2007 An example would be the cost of a dike to prevent flooding. Taxact 2007 Exception. Taxact 2007   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 ). Taxact 2007 Related expenses. Taxact 2007   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. Taxact 2007 However, they may be deductible as business expenses if the damaged or stolen property is business property. Taxact 2007 Replacement cost. Taxact 2007   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. Taxact 2007 Example. Taxact 2007 You bought a new chair 4 years ago for $300. Taxact 2007 In April, a fire destroyed the chair. Taxact 2007 You estimate that it would cost $500 to replace it. Taxact 2007 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. Taxact 2007 The chair was not insured. Taxact 2007 Your loss is $100, the FMV of the chair before the fire. Taxact 2007 It is not $500, the replacement cost. Taxact 2007 Sentimental value. Taxact 2007   Do not consider sentimental value when determining your loss. Taxact 2007 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. Taxact 2007 Decline in market value of property in or near casualty area. Taxact 2007   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. Taxact 2007 You have a loss only for actual casualty damage to your property. Taxact 2007 However, if your home is in a federally declared disaster area, see Disaster Area Losses , later. Taxact 2007 Costs of photographs and appraisals. Taxact 2007   Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. Taxact 2007 Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. Taxact 2007   Appraisals are used to figure the decrease in FMV because of a casualty or theft. Taxact 2007 See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. Taxact 2007   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. Taxact 2007 They are expenses in determining your tax liability. Taxact 2007 You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). Taxact 2007 Adjusted Basis The measure of your investment in the property you own is its basis. Taxact 2007 For property you buy, your basis is usually its cost to you. Taxact 2007 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. Taxact 2007 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. Taxact 2007 Adjustments to basis. Taxact 2007    While you own the property, various events may take place that change your basis. Taxact 2007 Some events, such as additions or permanent improvements to the property, increase basis. Taxact 2007 Others, such as earlier casualty losses and depreciation deductions, decrease basis. Taxact 2007 When you add the increases to the basis and subtract the decreases from the basis, the result is your adjusted basis. Taxact 2007 See Publication 551 for more information on figuring the basis of your property. Taxact 2007 Insurance and Other Reimbursements If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Taxact 2007 You do not have a casualty or theft loss to the extent you are reimbursed. Taxact 2007 If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Taxact 2007 You must reduce your loss even if you do not receive payment until a later tax year. Taxact 2007 See Reimbursement Received After Deducting Loss , later. Taxact 2007 Failure to file a claim for reimbursement. Taxact 2007   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. Taxact 2007 Otherwise, you cannot deduct this loss as a casualty or theft. Taxact 2007 The portion of the loss usually not covered by insurance (for example, a deductible) is not subject to this rule. Taxact 2007 Example. Taxact 2007 You have a car insurance policy with a $1,000 deductible. Taxact 2007 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). Taxact 2007 This is true, even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. Taxact 2007 Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. Taxact 2007 Other types of reimbursements are discussed next. Taxact 2007 Also see the Instructions for Form 4684. Taxact 2007 Employer's emergency disaster fund. Taxact 2007   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. Taxact 2007 Take into consideration only the amount you used to replace your destroyed or damaged property. Taxact 2007 Example. Taxact 2007 Your home was extensively damaged by a tornado. Taxact 2007 Your loss after reimbursement from your insurance company was $10,000. Taxact 2007 Your employer set up a disaster relief fund for its employees. Taxact 2007 Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. Taxact 2007 You received $4,000 from the fund and spent the entire amount on repairs to your home. Taxact 2007 In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. Taxact 2007 Your casualty loss before applying the deduction limits (discussed later) is $6,000. Taxact 2007 Cash gifts. Taxact 2007   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. Taxact 2007 This applies even if you use the money to pay for repairs to property damaged in the disaster. Taxact 2007 Example. Taxact 2007 Your home was damaged by a hurricane. Taxact 2007 Relatives and neighbors made cash gifts to you that were excludable from your income. Taxact 2007 You used part of the cash gifts to pay for repairs to your home. Taxact 2007 There were no limits or restrictions on how you could use the cash gifts. Taxact 2007 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. Taxact 2007 Insurance payments for living expenses. Taxact 2007   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. Taxact 2007 You lose the use of your main home because of a casualty. Taxact 2007 Government authorities do not allow you access to your main home because of a casualty or threat of one. Taxact 2007 Inclusion in income. Taxact 2007   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. Taxact 2007 Report this amount on Form 1040, line 21. Taxact 2007 However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. Taxact 2007 See Qualified disaster relief payments , later, under Disaster Area Losses. Taxact 2007   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. Taxact 2007 Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. Taxact 2007 Generally, these expenses include the amounts you pay for the following. Taxact 2007 Renting suitable housing. Taxact 2007 Transportation. Taxact 2007 Food. Taxact 2007 Utilities. Taxact 2007 Miscellaneous services. Taxact 2007 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. Taxact 2007 Example. Taxact 2007 As a result of a fire, you vacated your apartment for a month and moved to a motel. Taxact 2007 You normally pay $525 a month for rent. Taxact 2007 None was charged for the month the apartment was vacated. Taxact 2007 Your motel rent for this month was $1,200. Taxact 2007 You normally pay $200 a month for food. Taxact 2007 Your food expenses for the month you lived in the motel were $400. Taxact 2007 You received $1,100 from your insurance company to cover your living expenses. Taxact 2007 You determine the payment you must include in income as follows. Taxact 2007 1. Taxact 2007 Insurance payment for living expenses $1,100 2. Taxact 2007 Actual expenses during the month you are unable to use your home because of the fire $1,600   3. Taxact 2007 Normal living expenses 725   4. Taxact 2007 Temporary increase in living expenses: Subtract line 3  from line 2 875 5. Taxact 2007 Amount of payment includible in income: Subtract line 4 from line 1 $ 225 Tax year of inclusion. Taxact 2007   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. Taxact 2007 Example. Taxact 2007 Your main home was destroyed by a tornado in August 2011. Taxact 2007 You regained use of your home in November 2012. Taxact 2007 The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. Taxact 2007 You include this amount in income on your 2012 Form 1040. Taxact 2007 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. Taxact 2007 Disaster relief. Taxact 2007   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. Taxact 2007 Table 2. Taxact 2007 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. Taxact 2007 Apply this rule to personal-use property after you have figured the amount of your loss. Taxact 2007 You must reduce your total casualty or theft loss by 10% of your adjusted gross income. Taxact 2007 Apply this rule to personal-use property after you reduce each loss by $100 (the $100 rule). Taxact 2007 You must reduce your total casualty or theft loss by 2% of your adjusted gross income. Taxact 2007 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. Taxact 2007 Single Event Apply this rule only once, even if many pieces of property are affected. Taxact 2007 Apply this rule only once, even if many pieces of property are affected. Taxact 2007 Apply this rule only once, even if many pieces of property are affected. Taxact 2007 More Than One Event Apply to the loss from each event. Taxact 2007 Apply to the total of all your losses from all events. Taxact 2007 Apply to the total of all your losses from all events. Taxact 2007 More Than One Person— With Loss From the   Same Event  (other than a married couple  filing jointly) Apply separately to each person. Taxact 2007 Apply separately to each person. Taxact 2007 Apply separately to each person. Taxact 2007 Married Couple—  With Loss From the  Same Event Filing Joint Return Apply as if you were one person. Taxact 2007 Apply as if you were one person. Taxact 2007 Apply as if you were one person. Taxact 2007 Filing Separate Return Apply separately to each spouse. Taxact 2007 Apply separately to each spouse. Taxact 2007 Apply separately to each spouse. Taxact 2007 More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. Taxact 2007 Apply separately to each owner of jointly owned property. Taxact 2007 Apply separately to each owner of jointly owned property. Taxact 2007    Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster, are not taxable income to you. Taxact 2007 For more information, see Qualified disaster relief payments under Disaster Area Losses, later. Taxact 2007   Disaster unemployment assistance payments are unemployment benefits that are taxable. Taxact 2007   Generally, disaster relief grants received under the Robert T. Taxact 2007 Stafford Disaster Relief and Emergency Assistance Act are not included in your income. Taxact 2007 See Federal disaster relief grants , later, under Disaster Area Losses. Taxact 2007 Loan proceeds. Taxact 2007   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. Taxact 2007 If you have a federal loan that is canceled (forgiven), see Federal loan canceled , later, under Disaster Area Losses. Taxact 2007 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. Taxact 2007 This section explains the adjustment you may have to make. Taxact 2007 Actual reimbursement less than expected. Taxact 2007   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. Taxact 2007 Example. Taxact 2007 Your personal car had a FMV of $2,000 when it was destroyed in a collision with another car in 2012. Taxact 2007 The accident was due to the negligence of the other driver. Taxact 2007 At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. Taxact 2007 You did not have a deductible loss in 2012. Taxact 2007 In January 2013, the court awards you a judgment of $2,000. Taxact 2007 However, in July it becomes apparent that you will be unable to collect any amount from the other driver. Taxact 2007 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). Taxact 2007 Actual reimbursement more than expected. Taxact 2007   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. Taxact 2007 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. Taxact 2007 You do not refigure your tax for the year you claimed the deduction. Taxact 2007 See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. Taxact 2007 Example. Taxact 2007 In 2012, a hurricane destroyed your motorboat. Taxact 2007 Your loss was $3,000, and you estimated that your insurance would cover $2,500 of it. Taxact 2007 You did not itemize deductions on your 2012 return, so you could not deduct the loss. Taxact 2007 When the insurance company reimburses you for the loss, you do not report any of the reimbursement as income. Taxact 2007 This is true even if it is for the full $3,000 because you did not deduct the loss on your 2012 return. Taxact 2007 The loss did not reduce your tax. Taxact 2007    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. Taxact 2007 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. Taxact 2007 Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. Taxact 2007 You may be able to postpone reporting any remaining gain as explained under Postponement of Gain, later. Taxact 2007 Actual reimbursement same as expected. Taxact 2007   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. Taxact 2007 Example. Taxact 2007 In December 2013, you had a collision while driving your personal car. Taxact 2007 Repairs to the car cost $950. Taxact 2007 You had $100 deductible collision insurance. Taxact 2007 Your insurance company agreed to reimburse you for the rest of the damage. Taxact 2007 Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. Taxact 2007 Due to the $100 rule, you cannot deduct the $100 you paid as the deductible. Taxact 2007 When you receive the $850 from the insurance company in 2014, do not report it as income. Taxact 2007 Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. Taxact 2007 The deduction for casualty and theft losses of employee property and personal-use property is limited. Taxact 2007 A loss on employee property is subject to the 2% rule, discussed next. Taxact 2007 With certain exceptions, a loss on property you own for your personal use is subject to the $100 and 10% rules, discussed later. Taxact 2007 The 2%, $100, and 10% rules are also summarized in Table 2 . Taxact 2007 Losses on business property (other than employee property) and income-producing property are not subject to these rules. Taxact 2007 However, if your casualty or theft loss involved a home you used for business or rented out, your deductible loss may be limited. Taxact 2007 See the Instructions for Form 4684, Section B. Taxact 2007 If the casualty or theft loss involved property used in a passive activity, see Form 8582, Passive Activity Loss Limitations, and its instructions. Taxact 2007 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. Taxact 2007 Employee property is property used in performing services as an employee. Taxact 2007 $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. Taxact 2007 This reduction applies to each total casualty or theft loss. Taxact 2007 It does not matter how many pieces of property are involved in an event. Taxact 2007 Only a single $100 reduction applies. Taxact 2007 Example. Taxact 2007 You have $750 deductible collision insurance on your car. Taxact 2007 The car is damaged in a collision. Taxact 2007 The insurance company pays you for the damage minus the $750 deductible. Taxact 2007 The amount of the casualty loss is based solely on the deductible. Taxact 2007 The casualty loss is $650 ($750 − $100) because the first $100 of a casualty loss on personal-use property is not deductible. Taxact 2007 Single event. Taxact 2007   Generally, events closely related in origin cause a single casualty. Taxact 2007 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. Taxact 2007 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. Taxact 2007 Example 1. Taxact 2007 A thunderstorm destroyed your pleasure boat. Taxact 2007 You also lost some boating equipment in the storm. Taxact 2007 Your loss was $5,000 on the boat and $1,200 on the equipment. Taxact 2007 Your insurance company reimbursed you $4,500 for the damage to your boat. Taxact 2007 You had no insurance coverage on the equipment. Taxact 2007 Your casualty loss is from a single event and the $100 rule applies once. Taxact 2007 Figure your loss before applying the 10% rule (discussed later) as follows. Taxact 2007     Boat Equipment 1. Taxact 2007 Loss $5,000 $1,200 2. Taxact 2007 Subtract insurance 4,500 -0- 3. Taxact 2007 Loss after reimbursement $ 500 $1,200 4. Taxact 2007 Total loss $1,700 5. Taxact 2007 Subtract $100 100 6. Taxact 2007 Loss before 10% rule $1,600 Example 2. Taxact 2007 Thieves broke into your home in January and stole a ring and a fur coat. Taxact 2007 You had a loss of $200 on the ring and $700 on the coat. Taxact 2007 This is a single theft. Taxact 2007 The $100 rule applies to the total $900 loss. Taxact 2007 Example 3. Taxact 2007 In September, hurricane winds blew the roof off your home. Taxact 2007 Flood waters caused by the hurricane further damaged your home and destroyed your furniture and personal car. Taxact 2007 This is considered a single casualty. Taxact 2007 The $100 rule is applied to your total loss from the flood waters and the wind. Taxact 2007 More than one loss. Taxact 2007   If you have more than one casualty or theft loss during your tax year, you must reduce each loss by $100. Taxact 2007 Example. Taxact 2007 Your family car was damaged in an accident in January. Taxact 2007 Your loss after the insurance reimbursement was $75. Taxact 2007 In February, your car was damaged in another accident. Taxact 2007 This time your loss after the insurance reimbursement was $90. Taxact 2007 Apply the $100 rule to each separate casualty loss. Taxact 2007 Since neither accident resulted in a loss of over $100, you are not entitled to any deduction for these accidents. Taxact 2007 More than one person. Taxact 2007   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. Taxact 2007 Example. Taxact 2007 A fire damaged your house and also damaged the personal property of your house guest. Taxact 2007 You must reduce your loss by $100. Taxact 2007 Your house guest must reduce his or her loss by $100. Taxact 2007 Married taxpayers. Taxact 2007   If you and your spouse file a joint return, you are treated as one individual in applying the $100 rule. Taxact 2007 It does not matter whether you own the property jointly or separately. Taxact 2007   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. Taxact 2007 This is true even if you own the property jointly. Taxact 2007 If one spouse owns the property, only that spouse can figure a loss deduction on a separate return. Taxact 2007   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. Taxact 2007 Neither of you can figure your deduction on the entire loss on a separate return. Taxact 2007 Each of you must reduce the loss by $100. Taxact 2007 More than one owner. Taxact 2007   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. Taxact 2007 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. Taxact 2007 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. Taxact 2007 Apply this rule after you reduce each loss by $100. Taxact 2007 For more information, see the Form 4684 instructions. Taxact 2007 If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. Taxact 2007 Example. Taxact 2007 In June, you discovered that your house had been burglarized. Taxact 2007 Your loss after insurance reimbursement was $2,000. Taxact 2007 Your adjusted gross income for the year you discovered the theft is $29,500. Taxact 2007 Figure your theft loss as follows. Taxact 2007 1. Taxact 2007 Loss after insurance $2,000 2. Taxact 2007 Subtract $100 100 3. Taxact 2007 Loss after $100 rule $1,900 4. Taxact 2007 Subtract 10% of $29,500 AGI $2,950 5. Taxact 2007 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). Taxact 2007 More than one loss. Taxact 2007   If you have more than one casualty or theft loss during your tax year, reduce each loss by any reimbursement and by $100. Taxact 2007 Then you must reduce the total of all your losses by 10% of your adjusted gross income. Taxact 2007 Example. Taxact 2007 In March, you had a car accident that totally destroyed your car. Taxact 2007 You did not have collision insurance on your car, so you did not receive any insurance reimbursement. Taxact 2007 Your loss on the car was $1,800. Taxact 2007 In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items you had stored there. Taxact 2007 Your loss on the basement items after reimbursement was $2,100. Taxact 2007 Your adjusted gross income for the year that the accident and fire occurred is $25,000. Taxact 2007 You figure your casualty loss deduction as follows. Taxact 2007     Car Basement 1. Taxact 2007 Loss $1,800 $2,100 2. Taxact 2007 Subtract $100 per incident 100 100 3. Taxact 2007 Loss after $100 rule $1,700 $2,000 4. Taxact 2007 Total loss $3,700 5. Taxact 2007 Subtract 10% of $25,000 AGI 2,500 6. Taxact 2007 Casualty loss deduction $1,200 Married taxpayers. Taxact 2007   If you and your spouse file a joint return, you are treated as one individual in applying the 10% rule. Taxact 2007 It does not matter if you own the property jointly or separately. Taxact 2007   If you file separate returns, the 10% rule applies to each return on which a loss is claimed. Taxact 2007 More than one owner. Taxact 2007   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. Taxact 2007 Gains and losses. Taxact 2007   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. Taxact 2007 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. Taxact 2007 Casualty or theft gains do not include gains you choose to postpone. Taxact 2007 See Postponement of Gain, later. Taxact 2007 Losses more than gains. Taxact 2007   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. Taxact 2007 The rest, if any, is your deductible loss from personal-use property. Taxact 2007 Example. Taxact 2007 Your theft loss after reducing it by reimbursements and by $100 is $2,700. Taxact 2007 Your casualty gain is $700. Taxact 2007 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. Taxact 2007 Gains more than losses. Taxact 2007   If your recognized gains are more than your losses, subtract your losses from your gains. Taxact 2007 The difference is treated as a capital gain and must be reported on Schedule D (Form 1040). Taxact 2007 The 10% rule does not apply to your gains. Taxact 2007 Example. Taxact 2007 Your theft loss is $600 after reducing it by reimbursements and by $100. Taxact 2007 Your casualty gain is $1,600. Taxact 2007 Because your gain is more than your loss, you must report the $1,000 net gain ($1,600 − $600) on Schedule D (Form 1040). Taxact 2007 More information. Taxact 2007   For information on how to figure recognized gains, see Figuring a Gain , later. Taxact 2007 Figuring the Deduction Generally, you must figure your loss separately for each item stolen, damaged, or destroyed. Taxact 2007 However, a special rule applies to real property you own for personal use. Taxact 2007 Real property. Taxact 2007   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. Taxact 2007 Example 1. Taxact 2007 In June, a fire destroyed your lakeside cottage, which cost $144,800 (including $14,500 for the land) several years ago. Taxact 2007 (Your land was not damaged. Taxact 2007 ) This was your only casualty or theft loss for the year. Taxact 2007 The FMV of the property immediately before the fire was $180,000 ($145,000 for the cottage and $35,000 for the land). Taxact 2007 The FMV immediately after the fire was $35,000 (value of the land). Taxact 2007 You collected $130,000 from the insurance company. Taxact 2007 Your adjusted gross income for the year the fire occurred is $80,000. Taxact 2007 Your deduction for the casualty loss is $6,700, figured in the following manner. Taxact 2007 1. Taxact 2007 Adjusted basis of the entire property (cost in this example) $144,800 2. Taxact 2007 FMV of entire property  before fire $180,000 3. Taxact 2007 FMV of entire property after fire 35,000 4. Taxact 2007 Decrease in FMV of entire property (line 2 − line 3) $145,000 5. Taxact 2007 Loss (smaller of line 1 or line 4) $144,800 6. Taxact 2007 Subtract insurance 130,000 7. Taxact 2007 Loss after reimbursement $14,800 8. Taxact 2007 Subtract $100 100 9. Taxact 2007 Loss after $100 rule $14,700 10. Taxact 2007 Subtract 10% of $80,000 AGI 8,000 11. Taxact 2007 Casualty loss deduction $ 6,700 Example 2. Taxact 2007 You bought your home a few years ago. Taxact 2007 You paid $150,000 ($10,000 for the land and $140,000 for the house). Taxact 2007 You also spent an additional $2,000 for landscaping. Taxact 2007 This year a fire destroyed your home. Taxact 2007 The fire also damaged the shrubbery and trees in your yard. Taxact 2007 The fire was your only casualty or theft loss this year. Taxact 2007 Competent appraisers valued the property as a whole at $175,000 before the fire, but only $50,000 after the fire. Taxact 2007 Shortly after the fire, the insurance company paid you $95,000 for the loss. Taxact 2007 Your adjusted gross income for this year is $70,000. Taxact 2007 You figure your casualty loss deduction as follows. Taxact 2007 1. Taxact 2007 Adjusted basis of the entire property (cost of land, building, and landscaping) $152,000 2. Taxact 2007 FMV of entire property  before fire $175,000 3. Taxact 2007 FMV of entire property after fire 50,000 4. Taxact 2007 Decrease in FMV of entire property (line 2 − line 3) $125,000 5. Taxact 2007 Loss (smaller of line 1 or line 4) $125,000 6. Taxact 2007 Subtract insurance 95,000 7. Taxact 2007 Loss after reimbursement $30,000 8. Taxact 2007 Subtract $100 100 9. Taxact 2007 Loss after $100 rule $29,900 10. Taxact 2007 Subtract 10% of $70,000 AGI 7,000 11. Taxact 2007 Casualty loss deduction $ 22,900 Personal property. Taxact 2007   Personal property is any property that is not real property. Taxact 2007 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. Taxact 2007 Then combine these separate losses to figure the total loss. Taxact 2007 Reduce the total loss by $100 and 10% of your adjusted gross income to figure the loss deduction. Taxact 2007 Example 1. Taxact 2007 In August, a storm destroyed your pleasure boat, which cost $18,500. Taxact 2007 This was your only casualty or theft loss for the year. Taxact 2007 Its FMV immediately before the storm was $17,000. Taxact 2007 You had no insurance, but were able to salvage the motor of the boat and sell it for $200. Taxact 2007 Your adjusted gross income for the year the casualty occurred is $70,000. Taxact 2007 Although the motor was sold separately, it is part of the boat and not a separate item of property. Taxact 2007 You figure your casualty loss deduction as follows. Taxact 2007 1. Taxact 2007 Adjusted basis (cost in this example) $18,500 2. Taxact 2007 FMV before storm $17,000 3. Taxact 2007 FMV after storm 200 4. Taxact 2007 Decrease in FMV  (line 2 − line 3) $16,800 5. Taxact 2007 Loss (smaller of line 1 or line 4) $16,800 6. Taxact 2007 Subtract insurance -0- 7. Taxact 2007 Loss after reimbursement $16,800 8. Taxact 2007 Subtract $100 100 9. Taxact 2007 Loss after $100 rule $16,700 10. Taxact 2007 Subtract 10% of $70,000 AGI 7,000 11. Taxact 2007 Casualty loss deduction $ 9,700 Example 2. Taxact 2007 In June, you were involved in an auto accident that totally destroyed your personal car and your antique pocket watch. Taxact 2007 You had bought the car for $30,000. Taxact 2007 The FMV of the car just before the accident was $17,500. Taxact 2007 Its FMV just after the accident was $180 (scrap value). Taxact 2007 Your insurance company reimbursed you $16,000. Taxact 2007 Your watch was not insured. Taxact 2007 You had purchased it for $250. Taxact 2007 Its FMV just before the accident was $500. Taxact 2007 Your adjusted gross income for the year the accident occurred is $97,000. Taxact 2007 Your casualty loss deduction is zero, figured as follows. Taxact 2007     Car Watch 1. Taxact 2007 Adjusted basis (cost) $30,000 $250 2. Taxact 2007 FMV before accident $17,500 $500 3. Taxact 2007 FMV after accident 180 -0- 4. Taxact 2007 Decrease in FMV (line 2 − line 3) $17,320 $500 5. Taxact 2007 Loss (smaller of line 1 or line 4) $17,320 $250 6. Taxact 2007 Subtract insurance 16,000 -0- 7. Taxact 2007 Loss after reimbursement $1,320 $250 8. Taxact 2007 Total loss $1,570 9. Taxact 2007 Subtract $100 100 10. Taxact 2007 Loss after $100 rule $1,470 11. Taxact 2007 Subtract 10% of $97,000 AGI 9,700 12. Taxact 2007 Casualty loss deduction $ -0- Both real and personal properties. Taxact 2007   When a casualty involves both real and personal properties, you must figure the loss separately for each type of property. Taxact 2007 However, you apply a single $100 reduction to the total loss. Taxact 2007 Then, you apply the 10% rule to figure the casualty loss deduction. Taxact 2007 Example. Taxact 2007 In July, a hurricane damaged your home, which cost you $164,000 including land. Taxact 2007 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. Taxact 2007 Your household furnishings were also damaged. Taxact 2007 You separately figured the loss on each damaged household item and arrived at a total loss of $600. Taxact 2007 You collected $50,000 from the insurance company for the damage to your home, but your household furnishings were not insured. Taxact 2007 Your adjusted gross income for the year the hurricane occurred is $65,000. Taxact 2007 You figure your casualty loss deduction from the hurricane in the following manner. Taxact 2007 1. Taxact 2007 Adjusted basis of real property (cost in this example) $164,000 2. Taxact 2007 FMV of real property before hurricane $170,000 3. Taxact 2007 FMV of real property after hurricane 100,000 4. Taxact 2007 Decrease in FMV of real property (line 2 − line 3) $70,000 5. Taxact 2007 Loss on real property (smaller of line 1 or line 4) $70,000 6. Taxact 2007 Subtract insurance 50,000 7. Taxact 2007 Loss on real property after reimbursement $20,000 8. Taxact 2007 Loss on furnishings $600 9. Taxact 2007 Subtract insurance -0- 10. Taxact 2007 Loss on furnishings after reimbursement $600 11. Taxact 2007 Total loss (line 7 plus line 10) $20,600 12. Taxact 2007 Subtract $100 100 13. Taxact 2007 Loss after $100 rule $20,500 14. Taxact 2007 Subtract 10% of $65,000 AGI 6,500 15. Taxact 2007 Casualty loss deduction $14,000 Property used partly for business and partly for personal purposes. Taxact 2007   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. Taxact 2007 You must figure each loss separately because the losses attributed to these two uses are figured in two different ways. Taxact 2007 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. Taxact 2007 The $100 rule and the 10% rule apply only to the casualty or theft loss on the personal-use portion of the property. Taxact 2007 Example. Taxact 2007 You own a building that you constructed on leased land. Taxact 2007 You use half of the building for your business and you live in the other half. Taxact 2007 The cost of the building was $400,000. Taxact 2007 You made no further improvements or additions to it. Taxact 2007 A flood in March damaged the entire building. Taxact 2007 The FMV of the building was $380,000 immediately before the flood and $320,000 afterwards. Taxact 2007 Your insurance company reimbursed you $40,000 for the flood damage. Taxact 2007 Depreciation on the business part of the building before the flood totaled $24,000. Taxact 2007 Your adjusted gross income for the year the flood occurred is $125,000. Taxact 2007 You have a deductible business casualty loss of $10,000. Taxact 2007 You do not have a deductible personal casualty loss because of the 10% rule. Taxact 2007 You figure your loss as follows. Taxact 2007     Business   Personal     Part   Part 1. Taxact 2007 Cost (total $400,000) $200,000   $200,000 2. Taxact 2007 Subtract depreciation 24,000   -0- 3. Taxact 2007 Adjusted basis $176,000   $200,000 4. Taxact 2007 FMV before flood (total $380,000) $190,000   $190,000 5. Taxact 2007 FMV after flood (total $320,000) 160,000   160,000 6. Taxact 2007 Decrease in FMV  (line 4 − line 5) $30,000   $30,000 7. Taxact 2007 Loss (smaller of line 3 or line 6) $30,000   $30,000 8. Taxact 2007 Subtract insurance 20,000   20,000 9. Taxact 2007 Loss after reimbursement $10,000   $10,000 10. Taxact 2007 Subtract $100 on personal-use property -0-   100 11. Taxact 2007 Loss after $100 rule $10,000   $9,900 12. Taxact 2007 Subtract 10% of $125,000 AGI on personal-use property -0-   12,500 13. Taxact 2007 Deductible business loss $10,000     14. Taxact 2007 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. Taxact 2007 Your gain is figured as follows. Taxact 2007 The amount you receive (discussed next), minus Your adjusted basis in the property at the time of the casualty or theft. Taxact 2007 See Adjusted Basis , earlier, for information on adjusted basis. Taxact 2007 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. Taxact 2007 Amount you receive. Taxact 2007   The amount you receive includes any money plus the value of any property you receive minus any expenses you have in obtaining reimbursement. Taxact 2007 It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. Taxact 2007 Example. Taxact 2007 A hurricane destroyed your personal residence and the insurance company awarded you $145,000. Taxact 2007 You received $140,000 in cash. Taxact 2007 The remaining $5,000 was paid directly to the holder of a mortgage on the property. Taxact 2007 The amount you received includes the $5,000 reimbursement paid on the mortgage. Taxact 2007 Main home destroyed. Taxact 2007   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. Taxact 2007 You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). Taxact 2007 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. Taxact 2007 For information on this exclusion, see Publication 523. Taxact 2007 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. Taxact 2007 See Postponement of Gain , later. Taxact 2007 Reporting a gain. Taxact 2007   You generally must report your gain as income in the year you receive the reimbursement. Taxact 2007 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. Taxact 2007   For information on how to report a gain, see How To Report Gains and Losses , later. Taxact 2007    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. Taxact 2007 See 10% Rule under Deduction Limits, earlier. Taxact 2007 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. Taxact 2007 Your basis in the new property is generally the same as your adjusted basis in the property it replaces. Taxact 2007 You must ordinarily report the gain on your stolen or destroyed property if you receive money or unlike property as reimbursement. Taxact 2007 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. Taxact 2007 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. Taxact 2007 See Controlling interest in a corporation , later. Taxact 2007 If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. Taxact 2007 To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. Taxact 2007 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. Taxact 2007 Example. Taxact 2007 In 1970, you bought an oceanfront cottage for your personal use at a cost of $18,000. Taxact 2007 You made no further improvements or additions to it. Taxact 2007 When a storm destroyed the cottage this January, the cottage was worth $250,000. Taxact 2007 You received $146,000 from the insurance company in March. Taxact 2007 You had a gain of $128,000 ($146,000 − $18,000). Taxact 2007 You spent $144,000 to rebuild the cottage. Taxact 2007 Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. Taxact 2007 Buying replacement property from a related person. Taxact 2007   You cannot postpone reporting a gain from a casualty or theft if you buy the replacement property from a related person (discussed later). Taxact 2007 This rule applies to the following taxpayers. Taxact 2007 C corporations. Taxact 2007 Partnerships in which more than 50% of the capital or profits interests is owned by C corporations. Taxact 2007 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. Taxact 2007 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. Taxact 2007 If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Taxact 2007 If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Taxact 2007 Exception. Taxact 2007   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. Taxact 2007 Related persons. Taxact 2007   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. Taxact 2007 For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Taxact 2007 Death of a taxpayer. Taxact 2007   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. Taxact 2007 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. Taxact 2007 Replacement Property You must buy replacement property for the specific purpose of replacing your destroyed or stolen property. Taxact 2007 Property you acquire as a gift or inheritance does not qualify. Taxact 2007 You do not have to use the same funds you receive as