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1040x Filing Instructions

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1040x Filing Instructions

1040x filing instructions Publication 583 - Additional Material Prev  Up  Next   Home   More Online Publications

Topic 506 - Charitable Contributions

Charitable contributions are deductible only if you itemize deductions on Form 1040, Schedule A (PDF).

To be deductible, charitable contributions must be made to qualified organizations. Payments to individuals are never deductible. See Publication 526, Charitable Contributions. To determine if the organization that you have contributed to qualifies as a charitable organization for income tax deductions, review Exempt Organizations Select Check on the IRS.gov website.

If your contribution entitles you to merchandise, goods, or services, including admission to a charity ball, banquet, theatrical performance, or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.

For a contribution of cash, check, or other monetary gift (regardless of amount), you must maintain as a record of the contribution a bank record or a written communication from the qualified organization containing the name of the organization, the date of the contribution, and the amount of the contribution. In addition to deducting your cash contributions, you generally can deduct the fair market value of any other property you donate to qualified organizations. See Publication 561, Determining the Value of Donated Property. For any contribution of $250 or more (including contributions of cash or property), you must obtain and keep in your records a contemporaneous written acknowledgment from the qualified organization indicating the amount of the cash and a description of any property contributed. The acknowledgment must say whether the organization provided any goods or services in exchange for the gift and, if so, must provide a description and a good faith estimate of the value of those goods or services. One document from the qualified organization may satisfy both the written communication requirement for monetary gifts and the contemporaneous written acknowledgment requirement for all contributions of $250 or more.

You must fill out Form 8283 (PDF), and attach it to your return, if your deduction for a noncash contribution is more than $500. If you claim a deduction for a contribution of noncash property worth $5,000 or less, you must fill out Form 8283, Section A. If you claim a deduction for a contribution of noncash property worth more than $5,000, you will need a qualified appraisal of the noncash property and must fill out Form 8283, Section B. If you claim a deduction for a contribution of noncash property worth more than $500,000, you also will need to attach the qualified appraisal to your return.

Special rules apply to donations of certain types of property such as automobiles, inventory and investments that have appreciated in value. For more information, refer to Publication 526, Charitable Contributions. For information on determining the value of your noncash contributions, refer to Publication 561, Determining the Value of Donated Property.

Page Last Reviewed or Updated: December 12, 2013

The 1040x Filing Instructions

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