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Turbotax 2012

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Turbotax 2012

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

RI-2012-30, Nov. 15, 2012

BOSTON — Victims of Hurricane Sandy that began on Oct. 26, 2012 in parts of Rhode Island may qualify for tax relief from the Internal Revenue Service.

The President has declared Newport and Washington counties a federal disaster area. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Oct. 26, and on or before Feb. 1, have been postponed to Feb. 1, 2013.  

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Oct. 26, and on or before Nov. 26, as long as the deposits are made by Nov. 26, 2012.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area need to call the IRS disaster hotline at 866-562-5227 to request this tax relief.

For a full description of the relief being provided by the IRS to the victims of Hurricane Sandy, visit IRS.gov.

Covered Disaster Area

The counties above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Feb. 1 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Oct. 26 and on or before Feb. 1.

The IRS also gives affected taxpayers until Feb. 1 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Oct. 26 and on or before Feb. 1.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Oct. 26 and on or before Nov. 26 provided the taxpayer makes these deposits by Nov. 26.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “Rhode Island/Hurricane Sandy” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 800-TAX-FORM (800-829-3676). The IRS toll-free number for general tax questions is 800-829-1040.

Related Information

Disaster Assistance and Emergency Relief for Individuals and Businesses

Recent IRS Disaster Relief Announcements

 

Page Last Reviewed or Updated: 05-Nov-2013

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