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1040x Example

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

1040x example 5. 1040x example   How To Get Tax Help Table of Contents Low Income Taxpayer Clinics Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. 1040x example Free help with your tax return. 1040x example   You can get free help preparing your return nationwide from IRS-certified volunteers. 1040x example The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. 1040x example The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. 1040x example Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. 1040x example In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. 1040x example To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. 1040x example gov, download the IRS2Go app, or call 1-800-906-9887. 1040x example   As part of the TCE program, AARP offers the Tax-Aide counseling program. 1040x example To find the nearest AARP Tax-Aide site, visit AARP's website at www. 1040x example aarp. 1040x example org/money/taxaide or call 1-888-227-7669. 1040x example For more information on these programs, go to IRS. 1040x example gov and enter “VITA” in the search box. 1040x example Internet. 1040x example    IRS. 1040x example gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. 1040x example Download the free IRS2Go app from the iTunes app store or from Google Play. 1040x example Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. 1040x example Check the status of your 2013 refund with the Where's My Refund? application on IRS. 1040x example gov or download the IRS2Go app and select the Refund Status option. 1040x example The IRS issues more than 9 out of 10 refunds in less than 21 days. 1040x example Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. 1040x example You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. 1040x example The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. 1040x example Use the Interactive Tax Assistant (ITA) to research your tax questions. 1040x example No need to wait on the phone or stand in line. 1040x example The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. 1040x example When you reach the response screen, you can print the entire interview and the final response for your records. 1040x example New subject areas are added on a regular basis. 1040x example  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. 1040x example gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. 1040x example You can use the IRS Tax Map, to search publications and instructions by topic or keyword. 1040x example The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. 1040x example When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. 1040x example Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. 1040x example You can also ask the IRS to mail a return or an account transcript to you. 1040x example Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. 1040x example gov or by calling 1-800-908-9946. 1040x example Tax return and tax account transcripts are generally available for the current year and the past three years. 1040x example Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. 1040x example Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. 1040x example If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. 1040x example Check the status of your amended return using Where's My Amended Return? Go to IRS. 1040x example gov and enter Where's My Amended Return? in the search box. 1040x example You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. 1040x example It can take up to 3 weeks from the date you mailed it to show up in our system. 1040x example Make a payment using one of several safe and convenient electronic payment options available on IRS. 1040x example gov. 1040x example Select the Payment tab on the front page of IRS. 1040x example gov for more information. 1040x example Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. 1040x example Figure your income tax withholding with the IRS Withholding Calculator on IRS. 1040x example gov. 1040x example Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. 1040x example Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. 1040x example gov. 1040x example Request an Electronic Filing PIN by going to IRS. 1040x example gov and entering Electronic Filing PIN in the search box. 1040x example Download forms, instructions and publications, including accessible versions for people with disabilities. 1040x example Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. 1040x example gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. 1040x example An employee can answer questions about your tax account or help you set up a payment plan. 1040x example Before you visit, check the Office Locator on IRS. 1040x example gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. 1040x example If you have a special need, such as a disability, you can request an appointment. 1040x example Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. 1040x example Apply for an Employer Identification Number (EIN). 1040x example Go to IRS. 1040x example gov and enter Apply for an EIN in the search box. 1040x example Read the Internal Revenue Code, regulations, or other official guidance. 1040x example Read Internal Revenue Bulletins. 1040x example Sign up to receive local and national tax news and more by email. 1040x example Just click on “subscriptions” above the search box on IRS. 1040x example gov and choose from a variety of options. 1040x example Phone. 1040x example    You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. 1040x example Download the free IRS2Go app from the iTunes app store or from Google Play. 1040x example Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. 1040x example gov, or download the IRS2Go app. 1040x example Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. 1040x example The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. 1040x example Most VITA and TCE sites offer free electronic filing. 1040x example Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. 1040x example Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. 1040x example Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. 1040x example If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. 1040x example The IRS issues more than 9 out of 10 refunds in less than 21 days. 1040x example Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. 1040x example Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. 1040x example The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. 1040x example Note, the above information is for our automated hotline. 1040x example Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. 1040x example Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. 1040x example You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. 1040x example It can take up to 3 weeks from the date you mailed it to show up in our system. 1040x example Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). 1040x example You should receive your order within 10 business days. 1040x example Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. 1040x example If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. 1040x example Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. 1040x example The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. 1040x example These individuals can also contact the IRS through relay services such as the Federal Relay Service. 1040x example Walk-in. 1040x example   You can find a selection of forms, publications and services — in-person. 1040x example Products. 1040x example You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. 1040x example Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. 1040x example Services. 1040x example You can walk in to your local TAC for face-to-face tax help. 1040x example An employee can answer questions about your tax account or help you set up a payment plan. 1040x example Before visiting, use the Office Locator tool on IRS. 1040x example gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. 1040x example Mail. 1040x example   You can send your order for forms, instructions, and publications to the address below. 1040x example You should receive a response within 10 business days after your request is received. 1040x example Internal Revenue Service 1201 N. 1040x example Mitsubishi Motorway Bloomington, IL 61705-6613    The Taxpayer Advocate Service Is Here to Help You. 1040x example The Taxpayer Advocate Service (TAS) is your voice at the IRS. 1040x example Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. 1040x example   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. 1040x example We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. 1040x example You face (or your business is facing) an immediate threat of adverse action. 1040x example You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. 1040x example   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. 1040x example Here's why we can help: TAS is an independent organization within the IRS. 1040x example Our advocates know how to work with the IRS. 1040x example Our services are free and tailored to meet your needs. 1040x example We have offices in every state, the District of Columbia, and Puerto Rico. 1040x example   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at Taxpayer Advocate, or call us toll-free at 1-877-777-4778. 1040x example   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. 1040x example If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. 1040x example Low Income Taxpayer Clinics Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals and tax collection disputes. 1040x example Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. 1040x example Visit Taxpayer Advocate or see IRS Publication 4134, Low Income Taxpayer Clinic List. 1040x example Prev  Up  Next   Home   More Online Publications