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Can You File 2011 Taxes Now

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Can You File 2011 Taxes Now

Can you file 2011 taxes now 3. Can you file 2011 taxes now   Ordinary or Capital Gain or Loss for Business Property Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. Can you file 2011 taxes now Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sales Gifts Transfers at Death Like-Kind Exchanges and Involuntary Conversions Multiple Properties Introduction When you dispose of business property, your taxable gain or loss is usually a section 1231 gain or loss. Can you file 2011 taxes now Its treatment as ordinary or capital is determined under rules for section 1231 transactions. Can you file 2011 taxes now When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. Can you file 2011 taxes now Any remaining gain is a section 1231 gain. Can you file 2011 taxes now Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Useful Items - You may want to see: Publication 534 Depreciating Property Placed in Service Before 1987 537 Installment Sales 547 Casualties, Disasters and Thefts 551 Basis of Assets 946 How To Depreciate Property Form (and Instructions) 4797 Sales of Business Property See chapter 5 for information about getting publications and forms. Can you file 2011 taxes now Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (discussed below). Can you file 2011 taxes now Their treatment as ordinary or capital depends on whether you have a net gain or a net loss from all your section 1231 transactions. Can you file 2011 taxes now If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). Can you file 2011 taxes now Do not take that gain into account as section 1231 gain. Can you file 2011 taxes now Section 1231 transactions. Can you file 2011 taxes now   The following transactions result in gain or loss subject to section 1231 treatment. Can you file 2011 taxes now Sales or exchanges of real property or depreciable personal property. Can you file 2011 taxes now This property must be used in a trade or business and held longer than 1 year. Can you file 2011 taxes now Generally, property held for the production of rents or royalties is considered to be used in a trade or business. Can you file 2011 taxes now Depreciable personal property includes amortizable section 197 intangibles (described in chapter 2 under Other Dispositions). Can you file 2011 taxes now Sales or exchanges of leaseholds. Can you file 2011 taxes now The leasehold must be used in a trade or business and held longer than 1 year. Can you file 2011 taxes now Sales or exchanges of cattle and horses. Can you file 2011 taxes now The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 2 years or longer. Can you file 2011 taxes now Sales or exchanges of other livestock. Can you file 2011 taxes now This livestock does not include poultry. Can you file 2011 taxes now It must be held for draft, breeding, dairy, or sporting purposes and held for 1 year or longer. Can you file 2011 taxes now Sales or exchanges of unharvested crops. Can you file 2011 taxes now The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person and the land must be held longer than 1 year. Can you file 2011 taxes now You cannot keep any right or option to directly or indirectly reacquire the land (other than a right customarily incident to a mortgage or other security transaction). Can you file 2011 taxes now Growing crops sold with a lease on the land, though sold to the same person in the same transaction, are not included. Can you file 2011 taxes now Cutting of timber or disposal of timber, coal, or iron ore. Can you file 2011 taxes now The cutting or disposal must be treated as a sale, as described in chapter 2 under Timber and Coal and Iron Ore. Can you file 2011 taxes now Condemnations. Can you file 2011 taxes now The condemned property must have been held longer than 1 year. Can you file 2011 taxes now It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. Can you file 2011 taxes now It cannot be property held for personal use. Can you file 2011 taxes now Casualties and thefts. Can you file 2011 taxes now The casualty or theft must have affected business property, property held for the production of rents and royalties, or investment property (such as notes and bonds). Can you file 2011 taxes now You must have held the property longer than 1 year. Can you file 2011 taxes now However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. Can you file 2011 taxes now For more information on casualties and thefts, see Publication 547. Can you file 2011 taxes now Property for sale to customers. Can you file 2011 taxes now   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. Can you file 2011 taxes now If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. Can you file 2011 taxes now Example. Can you file 2011 taxes now You manufacture and sell steel cable, which you deliver on returnable reels that are depreciable property. Can you file 2011 taxes now Customers make deposits on the reels, which you refund if the reels are returned within a year. Can you file 2011 taxes now If they are not returned, you keep each deposit as the agreed-upon sales price. Can you file 2011 taxes now Most reels are returned within the 1-year period. Can you file 2011 taxes now You keep adequate records showing depreciation and other charges to the capitalized cost of the reels. Can you file 2011 taxes now Under these conditions, the reels are not property held for sale to customers in the ordinary course of your business. Can you file 2011 taxes now Any gain or loss resulting from their not being returned may be capital or ordinary, depending on your section 1231 transactions. Can you file 2011 taxes now Copyrights. Can you file 2011 taxes now    The sale of a copyright, a literary, musical, or artistic composition, or similar property is not a section 1231 transaction if your personal efforts created the property, or if you acquired the property in a way that entitled you to the basis of the previous owner whose personal efforts created it (for example, if you receive the property as a gift). Can you file 2011 taxes now The sale of such property results in ordinary income and generally is reported in Part II of Form 4797. Can you file 2011 taxes now Treatment as ordinary or capital. Can you file 2011 taxes now   To determine the treatment of section 1231 gains and losses, combine all your section 1231 gains and losses for the year. Can you file 2011 taxes now If you have a net section 1231 loss, it is ordinary loss. Can you file 2011 taxes now If you have a net section 1231 gain, it is ordinary income up to the amount of your nonrecaptured section 1231 losses from previous years. Can you file 2011 taxes now The rest, if any, is long-term capital gain. Can you file 2011 taxes now Nonrecaptured section 1231 losses. Can you file 2011 taxes now   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain. Can you file 2011 taxes now Therefore, if in any of your five preceding tax years you had section 1231 losses, a net gain for the current year from the sale of section 1231 assets is ordinary gain to the extent of your prior losses. Can you file 2011 taxes now These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. Can you file 2011 taxes now Example. Can you file 2011 taxes now In 2013, Ben has a $2,000 net section 1231 gain. Can you file 2011 taxes now To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. Can you file 2011 taxes now From 2008 through 2012 he had the following section 1231 gains and losses. Can you file 2011 taxes now Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800 Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. Can you file 2011 taxes now 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if otherwise nontaxable) as ordinary income. Can you file 2011 taxes now To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. Can you file 2011 taxes now This includes the date and manner of acquisition, cost or other basis, depreciation or amortization, and all other adjustments that affect basis. Can you file 2011 taxes now On property you acquired in a nontaxable exchange or as a gift, your records also must indicate the following information. Can you file 2011 taxes now Whether the adjusted basis was figured using depreciation or amortization you claimed on other property. Can you file 2011 taxes now Whether the adjusted basis was figured using depreciation or amortization another person claimed. Can you file 2011 taxes now Corporate distributions. Can you file 2011 taxes now   For information on property distributed by corporations, see Distributions to Shareholders in Publication 542, Corporations. Can you file 2011 taxes now General asset accounts. Can you file 2011 taxes now   Different rules apply to dispositions of property you depreciated using a general asset account. Can you file 2011 taxes now For information on these rules, see Publication 946. Can you file 2011 taxes now Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable on the property. Can you file 2011 taxes now See Gain Treated as Ordinary Income, later. Can you file 2011 taxes now Any gain recognized that is more than the part that is ordinary income from depreciation is a section 1231 gain. Can you file 2011 taxes now See Treatment as ordinary or capital under Section 1231 Gains and Losses, earlier. Can you file 2011 taxes now Section 1245 property defined. Can you file 2011 taxes now   Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. Can you file 2011 taxes now Personal property (either tangible or intangible). Can you file 2011 taxes now Other tangible property (except buildings and their structural components) used as any of the following. Can you file 2011 taxes now See Buildings and structural components below. Can you file 2011 taxes now An integral part of manufacturing, production, or extraction, or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services. Can you file 2011 taxes now A research facility in any of the activities in (a). Can you file 2011 taxes now A facility in any of the activities in (a) for the bulk storage of fungible commodities (discussed on the next page). Can you file 2011 taxes now That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. Can you file 2011 taxes now Amortization of certified pollution control facilities. Can you file 2011 taxes now The section 179 expense deduction. Can you file 2011 taxes now Deduction for clean-fuel vehicles and certain refueling property. Can you file 2011 taxes now Deduction for capital costs incurred in complying with Environmental Protection Agency sulfur regulations. Can you file 2011 taxes now Deduction for certain qualified refinery property. Can you file 2011 taxes now Deduction for qualified energy efficient commercial building property. Can you file 2011 taxes now Amortization of railroad grading and tunnel bores, if in effect before the repeal by the Revenue Reconciliation Act of 1990. Can you file 2011 taxes now (Repealed by Public Law 99-514, Tax Reform Act of 1986, section 242(a). Can you file 2011 taxes now ) Certain expenditures for child care facilities if in effect before repeal by Public Law 101-58, Omnibus Budget Reconciliation Act of 1990, section 11801(a)(13) (except with regards to deductions made prior to November 5, 1990). Can you file 2011 taxes now Expenditures to remove architectural and transportation barriers to the handicapped and elderly. Can you file 2011 taxes now Deduction for qualified tertiary injectant expenses. Can you file 2011 taxes now Certain reforestation expenditures. Can you file 2011 taxes now Deduction for election to expense qualified advanced mine safety equipment property. Can you file 2011 taxes now Single purpose agricultural (livestock) or horticultural structures. Can you file 2011 taxes now Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. Can you file 2011 taxes now Any railroad grading or tunnel bore. Can you file 2011 taxes now Buildings and structural components. Can you file 2011 taxes now   Section 1245 property does not include buildings and structural components. Can you file 2011 taxes now The term building includes a house, barn, warehouse, or garage. Can you file 2011 taxes now The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. Can you file 2011 taxes now   Do not treat a structure that is essentially machinery or equipment as a building or structural component. Can you file 2011 taxes now Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. Can you file 2011 taxes now   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. Can you file 2011 taxes now Structures such as oil and gas storage tanks, grain storage bins, silos, fractionating towers, blast furnaces, basic oxygen furnaces, coke ovens, brick kilns, and coal tipples are not treated as buildings, but as section 1245 property. Can you file 2011 taxes now Facility for bulk storage of fungible commodities. Can you file 2011 taxes now   This term includes oil or gas storage tanks and grain storage bins. Can you file 2011 taxes now Bulk storage means the storage of a commodity in a large mass before it is used. Can you file 2011 taxes now For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. Can you file 2011 taxes now To be fungible, a commodity must be such that one part may be used in place of another. Can you file 2011 taxes now   Stored materials that vary in composition, size, and weight are not fungible. Can you file 2011 taxes now Materials are not fungible if one part cannot be used in place of another part and the materials cannot be estimated and replaced by simple reference to weight, measure, and number. Can you file 2011 taxes now For example, the storage of different grades and forms of aluminum scrap is not storage of fungible commodities. Can you file 2011 taxes now Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. Can you file 2011 taxes now The depreciation and amortization allowed or allowable on the property. Can you file 2011 taxes now The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). Can you file 2011 taxes now A limit on this amount for gain on like-kind exchanges and involuntary conversions is explained later. Can you file 2011 taxes now For any other disposition of section 1245 property, ordinary income is the lesser of (1) earlier or the amount by which its fair market value is more than its adjusted basis. Can you file 2011 taxes now See Gifts and Transfers at Death, later. Can you file 2011 taxes now Use Part III of Form 4797 to figure the ordinary income part of the gain. Can you file 2011 taxes now Depreciation taken on other property or taken by other taxpayers. Can you file 2011 taxes now   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. Can you file 2011 taxes now Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. Can you file 2011 taxes now Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift). Can you file 2011 taxes now Depreciation and amortization. Can you file 2011 taxes now   Depreciation and amortization that must be recaptured as ordinary income include (but are not limited to) the following items. Can you file 2011 taxes now Ordinary depreciation deductions. Can you file 2011 taxes now Any special depreciation allowance you claimed. Can you file 2011 taxes now Amortization deductions for all the following costs. Can you file 2011 taxes now Acquiring a lease. Can you file 2011 taxes now Lessee improvements. Can you file 2011 taxes now Certified pollution control facilities. Can you file 2011 taxes now Certain reforestation expenses. Can you file 2011 taxes now Section 197 intangibles. Can you file 2011 taxes now Childcare facility expenses made before 1982, if in effect before the repeal of IRC 188. Can you file 2011 taxes now Franchises, trademarks, and trade names acquired before August 11, 1993. Can you file 2011 taxes now The section 179 deduction. Can you file 2011 taxes now Deductions for all the following costs. Can you file 2011 taxes now Removing barriers to the disabled and the elderly. Can you file 2011 taxes now Tertiary injectant expenses. Can you file 2011 taxes now Depreciable clean-fuel vehicles and refueling property (minus the amount of any recaptured deduction). Can you file 2011 taxes now Environmental cleanup costs. Can you file 2011 taxes now Certain reforestation expenses. Can you file 2011 taxes now Qualified disaster expenses. Can you file 2011 taxes now Any basis reduction for the investment credit (minus any basis increase for credit recapture). Can you file 2011 taxes now Any basis reduction for the qualified electric vehicle credit (minus any basis increase for credit recapture). Can you file 2011 taxes now Example. Can you file 2011 taxes now You file your returns on a calendar year basis. Can you file 2011 taxes now In February 2011, you bought and placed in service for 100% use in your business a light-duty truck (5-year property) that cost $10,000. Can you file 2011 taxes now You used the half-year convention and your MACRS deductions for the truck were $2,000 in 2011 and $3,200 in 2012. Can you file 2011 taxes now You did not take the section 179 deduction. Can you file 2011 taxes now You sold the truck in May 2013 for $7,000. Can you file 2011 taxes now The MACRS deduction in 2013, the year of sale, is $960 (½ of $1,920). Can you file 2011 taxes now Figure the gain treated as ordinary income as follows. Can you file 2011 taxes now 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $2,000 + $3,200 + $960) 6,160   4) Adjusted basis (subtract line 3 from line 2) $3,840 5) Gain realized (subtract line 4 from line 1) $3,160 6) Gain treated as ordinary income (lesser of line 3 or line 5) $3,160 Depreciation on other tangible property. Can you file 2011 taxes now   You must take into account depreciation during periods when the property was not used as an integral part of an activity or did not constitute a research or storage facility, as described earlier under Section 1245 property. Can you file 2011 taxes now   For example, if depreciation deductions taken on certain storage facilities amounted to $10,000, of which $6,000 is from the periods before their use in a prescribed business activity, you must use the entire $10,000 in determining ordinary income from depreciation. Can you file 2011 taxes now Depreciation allowed or allowable. Can you file 2011 taxes now   The greater of the depreciation allowed or allowable is generally the amount to use in figuring the part of gain to report as ordinary income. Can you file 2011 taxes now However, if in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. Can you file 2011 taxes now If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. Can you file 2011 taxes now   This treatment applies only when figuring what part of gain is treated as ordinary income under the rules for section 1245 depreciation recapture. Can you file 2011 taxes now Multiple asset accounts. Can you file 2011 taxes now   In figuring ordinary income from depreciation, you can treat any number of units of section 1245 property in a single depreciation account as one item if the total ordinary income from depreciation figured by using this method is not less than it would be if depreciation on each unit were figured separately. Can you file 2011 taxes now Example. Can you file 2011 taxes now In one transaction you sold 50 machines, 25 trucks, and certain other property that is not section 1245 property. Can you file 2011 taxes now All of the depreciation was recorded in a single depreciation account. Can you file 2011 taxes now After dividing the total received among the various assets sold, you figured that each unit of section 1245 property was sold at a gain. Can you file 2011 taxes now You can figure the ordinary income from depreciation as if the 50 machines and 25 trucks were one item. Can you file 2011 taxes now However, if five of the trucks had been sold at a loss, only the 50 machines and 20 of the trucks could be treated as one item in determining the ordinary income from depreciation. Can you file 2011 taxes now Normal retirement. Can you file 2011 taxes now   The normal retirement of section 1245 property in multiple asset accounts does not require recognition of gain as ordinary income from depreciation if your method of accounting for asset retirements does not require recognition of that gain. Can you file 2011 taxes now Section 1250 Property Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable on the property. Can you file 2011 taxes now To determine the additional depreciation on section 1250 property, see Additional Depreciation, below. Can you file 2011 taxes now Section 1250 property defined. Can you file 2011 taxes now   This includes all real property that is subject to an allowance for depreciation and that is not and never has been section 1245 property. Can you file 2011 taxes now It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. Can you file 2011 taxes now A fee simple interest in land is not included because it is not depreciable. Can you file 2011 taxes now   If your section 1250 property becomes section 1245 property because you change its use, you can never again treat it as section 1250 property. Can you file 2011 taxes now Additional Depreciation If you hold section 1250 property longer than 1 year, the additional depreciation is the actual depreciation adjustments that are more than the depreciation figured using the straight line method. Can you file 2011 taxes now For a list of items treated as depreciation adjustments, see Depreciation and amortization under Gain Treated as Ordinary Income, earlier. Can you file 2011 taxes now For the treatment of unrecaptured section 1250 gain, see Capital Gains Tax Rate, later. Can you file 2011 taxes now If you hold section 1250 property for 1 year or less, all the depreciation is additional depreciation. Can you file 2011 taxes now You will not have additional depreciation if any of the following conditions apply to the property disposed of. Can you file 2011 taxes now You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method; you held the property longer than 1 year; and, if the property was qualified property, you made a timely election not to claim any special depreciation allowance. Can you file 2011 taxes now In addition, if the property was in a renewal community, you must not have elected to claim a commercial revitalization deduction for property placed in service before January 1, 2010. Can you file 2011 taxes now The property was residential low-income rental property you held for 162/3 years or longer. Can you file 2011 taxes now For low-income rental housing on which the special 60-month depreciation for rehabilitation expenses was allowed, the 162/3 years start when the rehabilitated property is placed in service. Can you file 2011 taxes now You chose the alternate ACRS method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. Can you file 2011 taxes now The property was residential rental property or nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made); you held it longer than 1 year; and, if the property was qualified property, you made a timely election not to claim any special depreciation allowance. Can you file 2011 taxes now These properties are depreciated using the straight line method. Can you file 2011 taxes now In addition, if the property was in a renewal community, you must not have elected to claim a commercial revitalization deduction. Can you file 2011 taxes now Depreciation taken by other taxpayers or on other property. Can you file 2011 taxes now   Additional depreciation includes all depreciation adjustments to the basis of section 1250 property whether allowed to you or another person (as carryover basis property). Can you file 2011 taxes now Example. Can you file 2011 taxes now Larry Johnson gives his son section 1250 property on which he took $2,000 in depreciation deductions, of which $500 is additional depreciation. Can you file 2011 taxes now Immediately after the gift, the son's adjusted basis in the property is the same as his father's and reflects the $500 additional depreciation. Can you file 2011 taxes now On January 1 of the next year, after taking depreciation deductions of $1,000 on the property, of which $200 is additional depreciation, the son sells the property. Can you file 2011 taxes now At the time of sale, the additional depreciation is $700 ($500 allowed the father plus $200 allowed the son). Can you file 2011 taxes now Depreciation allowed or allowable. Can you file 2011 taxes now   The greater of depreciation allowed or allowable (to any person who held the property if the depreciation was used in figuring its adjusted basis in your hands) generally is the amount to use in figuring the part of the gain to be reported as ordinary income. Can you file 2011 taxes now If you can show that the deduction allowed for any tax year was less than the amount allowable, the lesser figure will be the depreciation adjustment for figuring additional depreciation. Can you file 2011 taxes now Retired or demolished property. Can you file 2011 taxes now   The adjustments reflected in adjusted basis generally do not include deductions for depreciation on retired or demolished parts of section 1250 property unless these deductions are reflected in the basis of replacement property that is section 1250 property. Can you file 2011 taxes now Example. Can you file 2011 taxes now A wing of your building is totally destroyed by fire. Can you file 2011 taxes now The depreciation adjustments figured in the adjusted basis of the building after the wing is destroyed do not include any deductions for depreciation on the destroyed wing unless it is replaced and the adjustments for depreciation on it are reflected in the basis of the replacement property. Can you file 2011 taxes now Figuring straight line depreciation. Can you file 2011 taxes now   The useful life and salvage value you would have used to figure straight line depreciation are the same as those used under the depreciation method you actually used. Can you file 2011 taxes now If you did not use a useful life under the depreciation method actually used (such as with the units-of-production method) or if you did not take salvage value into account (such as with the declining balance method), the useful life or salvage value for figuring what would have been the straight line depreciation is the useful life and salvage value you would have used under the straight line method. Can you file 2011 taxes now   Salvage value and useful life are not used for the ACRS method of depreciation. Can you file 2011 taxes now Figure straight line depreciation for ACRS real property by using its 15-, 18-, or 19-year recovery period as the property's useful life. Can you file 2011 taxes now   The straight line method is applied without any basis reduction for the investment credit. Can you file 2011 taxes now Property held by lessee. Can you file 2011 taxes now   If a lessee makes a leasehold improvement, the lease period for figuring what would have been the straight line depreciation adjustments includes all renewal periods. Can you file 2011 taxes now This inclusion of the renewal periods cannot extend the lease period taken into account to a period that is longer than the remaining useful life of the improvement. Can you file 2011 taxes now The same rule applies to the cost of acquiring a lease. Can you file 2011 taxes now   The term renewal period means any period for which the lease may be renewed, extended, or continued under an option exercisable by the lessee. Can you file 2011 taxes now However, the inclusion of renewal periods cannot extend the lease by more than two-thirds of the period that was the basis on which the actual depreciation adjustments were allowed. Can you file 2011 taxes now Applicable Percentage The applicable percentage used to figure the ordinary income because of additional depreciation depends on whether the real property you disposed of is nonresidential real property, residential rental property, or low-income housing. Can you file 2011 taxes now The percentages for these types of real property are as follows. Can you file 2011 taxes now Nonresidential real property. Can you file 2011 taxes now   For real property that is not residential rental property, the applicable percentage for periods after 1969 is 100%. Can you file 2011 taxes now For periods before 1970, the percentage is zero and no ordinary income because of additional depreciation before 1970 will result from its disposition. Can you file 2011 taxes now Residential rental property. Can you file 2011 taxes now   For residential rental property (80% or more of the gross income is from dwelling units) other than low-income housing, the applicable percentage for periods after 1975 is 100%. Can you file 2011 taxes now The percentage for periods before 1976 is zero. Can you file 2011 taxes now Therefore, no ordinary income because of additional depreciation before 1976 will result from a disposition of residential rental property. Can you file 2011 taxes now Low-income housing. Can you file 2011 taxes now    Low-income housing includes all the following types of residential rental property. Can you file 2011 taxes now Federally assisted housing projects if the mortgage is insured under section 221(d)(3) or 236 of the National Housing Act or housing financed or assisted by direct loan or tax abatement under similar provisions of state or local laws. Can you file 2011 taxes now Low-income rental housing for which a depreciation deduction for rehabilitation expenses was allowed. Can you file 2011 taxes now Low-income rental housing held for occupancy by families or individuals eligible to receive subsidies under section 8 of the United States Housing Act of 1937, as amended, or under provisions of state or local laws that authorize similar subsidies for low-income families. Can you file 2011 taxes now Housing financed or assisted by direct loan or insured under Title V of the Housing Act of 1949. Can you file 2011 taxes now   The applicable percentage for low-income housing is 100% minus 1% for each full month the property was held over 100 full months. Can you file 2011 taxes now If you have held low-income housing at least 16 years and 8 months, the percentage is zero and no ordinary income will result from its disposition. Can you file 2011 taxes now Foreclosure. Can you file 2011 taxes now   If low-income housing is disposed of because of foreclosure or similar proceedings, the monthly applicable percentage reduction is figured as if you disposed of the property on the starting date of the proceedings. Can you file 2011 taxes now Example. Can you file 2011 taxes now On June 1, 2001, you acquired low-income housing property. Can you file 2011 taxes now On April 3, 2012 (130 months after the property was acquired), foreclosure proceedings were started on the property and on December 3, 2013 (150 months after the property was acquired), the property was disposed of as a result of the foreclosure proceedings. Can you file 2011 taxes now The property qualifies for a reduced applicable percentage because it was held more than 100 full months. Can you file 2011 taxes now The applicable percentage reduction is 30% (130 months minus 100 months) rather than 50% (150 months minus 100 months) because it does not apply after April 3, 2012, the starting date of the foreclosure proceedings. Can you file 2011 taxes now Therefore, 70% of the additional depreciation is treated as ordinary income. Can you file 2011 taxes now Holding period. Can you file 2011 taxes now   The holding period used to figure the applicable percentage for low-income housing generally starts on the day after you acquired it. Can you file 2011 taxes now For example, if you bought low-income housing on January 1, 1997, the holding period starts on January 2, 1997. Can you file 2011 taxes now If you sold it on January 2, 2013, the holding period is exactly 192 full months. Can you file 2011 taxes now The applicable percentage for additional depreciation is 8%, or 100% minus 1% for each full month the property was held over 100 full months. Can you file 2011 taxes now Holding period for constructed, reconstructed, or erected property. Can you file 2011 taxes now   The holding period used to figure the applicable percentage for low-income housing you constructed, reconstructed, or erected starts on the first day of the month it is placed in service in a trade or business, in an activity for the production of income, or in a personal activity. Can you file 2011 taxes now Property acquired by gift or received in a tax-free transfer. Can you file 2011 taxes now   For low-income housing you acquired by gift or in a tax-free transfer the basis of which is figured by reference to the basis in the hands of the transferor, the holding period for the applicable percentage includes the holding period of the transferor. Can you file 2011 taxes now   If the adjusted basis of the property in your hands just after acquiring it is more than its adjusted basis to the transferor just before transferring it, the holding period of the difference is figured as if it were a separate improvement. Can you file 2011 taxes now See Low-Income Housing With Two or More Elements, next. Can you file 2011 taxes now Low-Income Housing With Two or More Elements If you dispose of low-income housing property that has two or more separate elements, the applicable percentage used to figure ordinary income because of additional depreciation may be different for each element. Can you file 2011 taxes now The gain to be reported as ordinary income is the sum of the ordinary income figured for each element. Can you file 2011 taxes now The following are the types of separate elements. Can you file 2011 taxes now A separate improvement (defined below). Can you file 2011 taxes now The basic section 1250 property plus improvements not qualifying as separate improvements. Can you file 2011 taxes now The units placed in service at different times before all the section 1250 property is finished. Can you file 2011 taxes now For example, this happens when a taxpayer builds an apartment building of 100 units and places 30 units in service (available for renting) on January 4, 2011, 50 on July 18, 2011, and the remaining 20 on January 18, 2012. Can you file 2011 taxes now As a result, the apartment house consists of three separate elements. Can you file 2011 taxes now The 36-month test for separate improvements. Can you file 2011 taxes now   A separate improvement is any improvement (qualifying under The 1-year test, below) added to the capital account of the property, but only if the total of the improvements during the 36-month period ending on the last day of any tax year is more than the greatest of the following amounts. Can you file 2011 taxes now Twenty-five percent of the adjusted basis of the property at the start of the first day of the 36-month period, or the first day of the holding period of the property, whichever is later. Can you file 2011 taxes now Ten percent of the unadjusted basis (adjusted basis plus depreciation and amortization adjustments) of the property at the start of the period determined in (1). Can you file 2011 taxes now $5,000. Can you file 2011 taxes now The 1-year test. Can you file 2011 taxes now   An addition to the capital account for any tax year (including a short tax year) is treated as an improvement only if the sum of all additions for the year is more than the greater of $2,000 or 1% of the unadjusted basis of the property. Can you file 2011 taxes now The unadjusted basis is figured as of the start of that tax year or the holding period of the property, whichever is later. Can you file 2011 taxes now In applying the 36-month test, improvements in any one of the 3 years are omitted entirely if the total improvements in that year do not qualify under the 1-year test. Can you file 2011 taxes now Example. Can you file 2011 taxes now The unadjusted basis of a calendar year taxpayer's property was $300,000 on January 1 of this year. Can you file 2011 taxes now During the year, the taxpayer made improvements A, B, and C, which cost $1,000, $600, and $700, respectively. Can you file 2011 taxes now The sum of the improvements, $2,300, is less than 1% of the unadjusted basis ($3,000), so the improvements do not satisfy the 1-year test and are not treated as improvements for the 36-month test. Can you file 2011 taxes now However, if improvement C had cost $1,500, the sum of these improvements would have been $3,100. Can you file 2011 taxes now Then, it would be necessary to apply the 36-month test to figure if the improvements must be treated as separate improvements. Can you file 2011 taxes now Addition to the capital account. Can you file 2011 taxes now   Any addition to the capital account made after the initial acquisition or completion of the property by you or any person who held the property during a period included in your holding period is to be considered when figuring the total amount of separate improvements. Can you file 2011 taxes now   The addition to the capital account of depreciable real property is the gross addition not reduced by amounts attributable to replaced property. Can you file 2011 taxes now For example, if a roof with an adjusted basis of $20,000 is replaced by a new roof costing $50,000, the improvement is the gross addition to the account, $50,000, and not the net addition of $30,000. Can you file 2011 taxes now The $20,000 adjusted basis of the old roof is no longer reflected in the basis of the property. Can you file 2011 taxes now The status of an addition to the capital account is not affected by whether it is treated as a separate property for determining depreciation deductions. Can you file 2011 taxes now   Whether an expense is treated as an addition to the capital account may depend on the final disposition of the entire property. Can you file 2011 taxes now If the expense item property and the basic property are sold in two separate transactions, the entire section 1250 property is treated as consisting of two distinct properties. Can you file 2011 taxes now Unadjusted basis. Can you file 2011 taxes now   In figuring the unadjusted basis as of a certain date, include the actual cost of all previous additions to the capital account plus those that did not qualify as separate improvements. Can you file 2011 taxes now However, the cost of components retired before that date is not included in the unadjusted basis. Can you file 2011 taxes now Holding period. Can you file 2011 taxes now   Use the following guidelines for figuring the applicable percentage for property with two or more elements. Can you file 2011 taxes now The holding period of a separate element placed in service before the entire section 1250 property is finished starts on the first day of the month that the separate element is placed in service. Can you file 2011 taxes now The holding period for each separate improvement qualifying as a separate element starts on the day after the improvement is acquired or, for improvements constructed, reconstructed, or erected, the first day of the month that the improvement is placed in service. Can you file 2011 taxes now The holding period for each improvement not qualifying as a separate element takes the holding period of the basic property. Can you file 2011 taxes now   If an improvement by itself does not meet the 1-year test (greater of $2,000 or 1% of the unadjusted basis), but it does qualify as a separate improvement that is a separate element (when grouped with other improvements made during the tax year), determine the start of its holding period as follows. Can you file 2011 taxes now Use the first day of a calendar month that is closest to the middle of the tax year. Can you file 2011 taxes now If there are two first days of a month that are equally close to the middle of the year, use the earlier date. Can you file 2011 taxes now Figuring ordinary income attributable to each separate element. Can you file 2011 taxes now   Figure ordinary income attributable to each separate element as follows. Can you file 2011 taxes now   Step 1. Can you file 2011 taxes now Divide the element's additional depreciation after 1975 by the sum of all the elements' additional depreciation after 1975 to determine the percentage used in Step 2. Can you file 2011 taxes now   Step 2. Can you file 2011 taxes now Multiply the percentage figured in Step 1 by the lesser of the additional depreciation after 1975 for the entire property or the gain from disposition of the entire property (the difference between the fair market value or amount realized and the adjusted basis). Can you file 2011 taxes now   Step 3. Can you file 2011 taxes now Multiply the result in Step 2 by the applicable percentage for the element. Can you file 2011 taxes now Example. Can you file 2011 taxes now You sold at a gain of $25,000 low-income housing property subject to the ordinary income rules of section 1250. Can you file 2011 taxes now The property consisted of four elements (W, X, Y, and Z). Can you file 2011 taxes now Step 1. Can you file 2011 taxes now The additional depreciation for each element is: W-$12,000; X-None; Y-$6,000; and Z-$6,000. Can you file 2011 taxes now The sum of the additional depreciation for all the elements is $24,000. Can you file 2011 taxes now Step 2. Can you file 2011 taxes now The depreciation deducted on element X was $4,000 less than it would have been under the straight line method. Can you file 2011 taxes now Additional depreciation on the property as a whole is $20,000 ($24,000 − $4,000). Can you file 2011 taxes now $20,000 is lower than the $25,000 gain on the sale, so $20,000 is used in Step 2. Can you file 2011 taxes now Step 3. Can you file 2011 taxes now The applicable percentages to be used in Step 3 for the elements are: W-68%; X-85%; Y-92%; and Z-100%. Can you file 2011 taxes now From these facts, the sum of the ordinary income for each element is figured as follows. Can you file 2011 taxes now   Step 1 Step 2 Step 3 Ordinary Income W . Can you file 2011 taxes now 50 $10,000 68% $ 6,800 X -0- -0- 85% -0- Y . Can you file 2011 taxes now 25 5,000 92% 4,600 Z . Can you file 2011 taxes now 25 5,000 100% 5,000 Sum of ordinary income of separate elements $16,400 Gain Treated as Ordinary Income To find what part of the gain from the disposition of section 1250 property is treated as ordinary income, follow these steps. Can you file 2011 taxes now In a sale, exchange, or involuntary conversion of the property, figure the amount realized that is more than the adjusted basis of the property. Can you file 2011 taxes now In any other disposition of the property, figure the fair market value that is more than the adjusted basis. Can you file 2011 taxes now Figure the additional depreciation for the periods after 1975. Can you file 2011 taxes now Multiply the lesser of (1) or (2) by the applicable percentage, discussed earlier under Applicable Percentage. Can you file 2011 taxes now Stop here if this is residential rental property or if (2) is equal to or more than (1). Can you file 2011 taxes now This is the gain treated as ordinary income because of additional depreciation. Can you file 2011 taxes now Subtract (2) from (1). Can you file 2011 taxes now Figure the additional depreciation for periods after 1969 but before 1976. Can you file 2011 taxes now Add the lesser of (4) or (5) to the result in (3). Can you file 2011 taxes now This is the gain treated as ordinary income because of additional depreciation. Can you file 2011 taxes now A limit on the amount treated as ordinary income for gain on like-kind exchanges and involuntary conversions is explained later. Can you file 2011 taxes now Use Form 4797, Part III, to figure the ordinary income part of the gain. Can you file 2011 taxes now Corporations. Can you file 2011 taxes now   Corporations, other than S corporations, must recognize an additional amount as ordinary income on the sale or other disposition of section 1250 property. Can you file 2011 taxes now The additional amount treated as ordinary income is 20% of the excess of the amount that would have been ordinary income if the property were section 1245 property over the amount treated as ordinary income under section 1250. Can you file 2011 taxes now Report this additional ordinary income on Form 4797, Part III, line 26 (f). Can you file 2011 taxes now Installment Sales If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. Can you file 2011 taxes now This applies even if no payments are received in that year. Can you file 2011 taxes now If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. Can you file 2011 taxes now For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. Can you file 2011 taxes now If you dispose of more than one asset in a single transaction, you must figure the gain on each asset separately so that it may be properly reported. Can you file 2011 taxes now To do this, allocate the selling price and the payments you receive in the year of sale to each asset. Can you file 2011 taxes now Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. Can you file 2011 taxes now For a detailed discussion of installment sales, see Publication 537. Can you file 2011 taxes now Gifts If you make a gift of depreciable personal property or real property, you do not have to report income on the transaction. Can you file 2011 taxes now However, if the person who receives it (donee) sells or otherwise disposes of the property in a disposition subject to recapture, the donee must take into account the depreciation you deducted in figuring the gain to be reported as ordinary income. Can you file 2011 taxes now For low-income housing, the donee must take into account the donor's holding period to figure the applicable percentage. Can you file 2011 taxes now See Applicable Percentage and its discussion Holding period under Section 1250 Property, earlier. Can you file 2011 taxes now Part gift and part sale or exchange. Can you file 2011 taxes now   If you transfer depreciable personal property or real property for less than its fair market value in a transaction considered to be partly a gift and partly a sale or exchange and you have a gain because the amount realized is more than your adjusted basis, you must report ordinary income (up to the amount of gain) to recapture depreciation. Can you file 2011 taxes now If the depreciation (additional depreciation, if section 1250 property) is more than the gain, the balance is carried over to the transferee to be taken into account on any later disposition of the property. Can you file 2011 taxes now However, see Bargain sale to charity, later. Can you file 2011 taxes now Example. Can you file 2011 taxes now You transferred depreciable personal property to your son for $20,000. Can you file 2011 taxes now When transferred, the property had an adjusted basis to you of $10,000 and a fair market value of $40,000. Can you file 2011 taxes now You took depreciation of $30,000. Can you file 2011 taxes now You are considered to have made a gift of $20,000, the difference between the $40,000 fair market value and the $20,000 sale price to your son. Can you file 2011 taxes now You have a taxable gain on the transfer of $10,000 ($20,000 sale price minus $10,000 adjusted basis) that must be reported as ordinary income from depreciation. Can you file 2011 taxes now You report $10,000 of your $30,000 depreciation as ordinary income on the transfer of the property, so the remaining $20,000 depreciation is carried over to your son for him to take into account on any later disposition of the property. Can you file 2011 taxes now Gift to charitable organization. Can you file 2011 taxes now   If you give property to a charitable organization, you figure your deduction for your charitable contribution by reducing the fair market value of the property by the ordinary income and short-term capital gain that would have resulted had you sold the property at its fair market value at the time of the contribution. Can you file 2011 taxes now Thus, your deduction for depreciable real or personal property given to a charitable organization does not include the potential ordinary gain from depreciation. Can you file 2011 taxes now   You also may have to reduce the fair market value of the contributed property by the long-term capital gain (including any section 1231 gain) that would have resulted had the property been sold. Can you file 2011 taxes now For more information, see Giving Property That Has Increased in Value in Publication 526. Can you file 2011 taxes now Bargain sale to charity. Can you file 2011 taxes now   If you transfer section 1245 or section 1250 property to a charitable organization for less than its fair market value and a deduction for the contribution part of the transfer is allowable, your ordinary income from depreciation is figured under different rules. Can you file 2011 taxes now First, figure the ordinary income as if you had sold the property at its fair market value. Can you file 2011 taxes now Then, allocate that amount between the sale and the contribution parts of the transfer in the same proportion that you allocated your adjusted basis in the property to figure your gain. Can you file 2011 taxes now See Bargain Sale under Gain or Loss From Sales and Exchanges in chapter 1. Can you file 2011 taxes now Report as ordinary income the lesser of the ordinary income allocated to the sale or your gain from the sale. Can you file 2011 taxes now Example. Can you file 2011 taxes now You sold section 1245 property in a bargain sale to a charitable organization and are allowed a deduction for your contribution. Can you file 2011 taxes now Your gain on the sale was $1,200, figured by allocating 20% of your adjusted basis in the property to the part sold. Can you file 2011 taxes now If you had sold the property at its fair market value, your ordinary income would have been $5,000. Can you file 2011 taxes now Your ordinary income is $1,000 ($5,000 × 20%) and your section 1231 gain is $200 ($1,200 – $1,000). Can you file 2011 taxes now Transfers at Death When a taxpayer dies, no gain is reported on depreciable personal property or real property transferred to his or her estate or beneficiary. Can you file 2011 taxes now For information on the tax liability of a decedent, see Publication 559, Survivors, Executors, and Administrators. Can you file 2011 taxes now However, if the decedent disposed of the property while alive and, because of his or her method of accounting or for any other reason, the gain from the disposition is reportable by the estate or beneficiary, it must be reported in the same way the decedent would have had to report it if he or she were still alive. Can you file 2011 taxes now Ordinary income due to depreciation must be reported on a transfer from an executor, administrator, or trustee to an heir, beneficiary, or other individual if the transfer is a sale or exchange on which gain is realized. Can you file 2011 taxes now Example 1. Can you file 2011 taxes now Janet Smith owned depreciable property that, upon her death, was inherited by her son. Can you file 2011 taxes now No ordinary income from depreciation is reportable on the transfer, even though the value used for estate tax purposes is more than the adjusted basis of the property to Janet when she died. Can you file 2011 taxes now However, if she sold the property before her death and realized a gain and if, because of her method of accounting, the proceeds from the sale are income in respect of a decedent reportable by her son, he must report ordinary income from depreciation. Can you file 2011 taxes now Example 2. Can you file 2011 taxes now The trustee of a trust created by a will transfers depreciable property to a beneficiary in satisfaction of a specific bequest of $10,000. Can you file 2011 taxes now If the property had a value of $9,000 at the date used for estate tax valuation purposes, the $1,000 increase in value to the date of distribution is a gain realized by the trust. Can you file 2011 taxes now Ordinary income from depreciation must be reported by the trust on the transfer. Can you file 2011 taxes now Like-Kind Exchanges and Involuntary Conversions A like-kind exchange of your depreciable property or an involuntary conversion of the property into similar or related property will not result in your having to report ordinary income from depreciation unless money or property other than like-kind, similar, or related property is also received in the transaction. Can you file 2011 taxes now For information on like-kind exchanges and involuntary conversions, see chapter 1. Can you file 2011 taxes now Depreciable personal property. Can you file 2011 taxes now   If you have a gain from either a like-kind exchange or an involuntary conversion of your depreciable personal property, the amount to be reported as ordinary income from depreciation is the amount figured under the rules explained earlier (see Section 1245 Property), limited to the sum of the following amounts. Can you file 2011 taxes now The gain that must be included in income under the rules for like-kind exchanges or involuntary conversions. Can you file 2011 taxes now The fair market value of the like-kind, similar, or related property other than depreciable personal property acquired in the transaction. Can you file 2011 taxes now Example 1. Can you file 2011 taxes now You bought a new machine for $4,300 cash plus your old machine for which you were allowed a $1,360 trade-in. Can you file 2011 taxes now The old machine cost you $5,000 two years ago. Can you file 2011 taxes now You took depreciation deductions of $3,950. Can you file 2011 taxes now Even though you deducted depreciation of $3,950, the $310 gain ($1,360 trade-in allowance minus $1,050 adjusted basis) is not reported because it is postponed under the rules for like-kind exchanges and you received only depreciable personal property in the exchange. Can you file 2011 taxes now Example 2. Can you file 2011 taxes now You bought office machinery for $1,500 two years ago and deducted $780 depreciation. Can you file 2011 taxes now This year a fire destroyed the machinery and you received $1,200 from your fire insurance, realizing a gain of $480 ($1,200 − $720 adjusted basis). Can you file 2011 taxes now You choose to postpone reporting gain, but replacement machinery cost you only $1,000. Can you file 2011 taxes now Your taxable gain under the rules for involuntary conversions is limited to the remaining $200 insurance payment. Can you file 2011 taxes now All your replacement property is depreciable personal property, so your ordinary income from depreciation is limited to $200. Can you file 2011 taxes now Example 3. Can you file 2011 taxes now A fire destroyed office machinery you bought for $116,000. Can you file 2011 taxes now The depreciation deductions were $91,640 and the machinery had an adjusted basis of $24,360. Can you file 2011 taxes now You received a $117,000 insurance payment, realizing a gain of $92,640. Can you file 2011 taxes now You immediately spent $105,000 of the insurance payment for replacement machinery and $9,000 for stock that qualifies as replacement property and you choose to postpone reporting the gain. Can you file 2011 taxes now $114,000 of the $117,000 insurance payment was used to buy replacement property, so the gain that must be included in income under the rules for involuntary conversions is the part not spent, or $3,000. Can you file 2011 taxes now The part of the insurance payment ($9,000) used to buy the nondepreciable property (the stock) also must be included in figuring the gain from depreciation. Can you file 2011 taxes now The amount you must report as ordinary income on the transaction is $12,000, figured as follows. Can you file 2011 taxes now 1) Gain realized on the transaction ($92,640) limited to depreciation ($91,640) $91,640 2) Gain includible in income (amount not spent) 3,000     Plus: fair market value of property other than depreciable personal property (the stock) 9,000 12,000 Amount reportable as ordinary income (lesser of (1) or (2)) $12,000   If, instead of buying $9,000 in stock, you bought $9,000 worth of depreciable personal property similar or related in use to the destroyed property, you would only report $3,000 as ordinary income. Can you file 2011 taxes now Depreciable real property. Can you file 2011 taxes now   If you have a gain from either a like-kind exchange or involuntary conversion of your depreciable real property, ordinary income from additional depreciation is figured under the rules explained earlier (see Section 1250 Property), limited to the greater of the following amounts. Can you file 2011 taxes now The gain that must be reported under the rules for like-kind exchanges or involuntary conversions plus the fair market value of stock bought as replacement property in acquiring control of a corporation. Can you file 2011 taxes now The gain you would have had to report as ordinary income from additional depreciation had the transaction been a cash sale minus the cost (or fair market value in an exchange) of the depreciable real property acquired. Can you file 2011 taxes now   The ordinary income not reported for the year of the disposition is carried over to the depreciable real property acquired in the like-kind exchange or involuntary conversion as additional depreciation from the property disposed of. Can you file 2011 taxes now Further, to figure the applicable percentage of additional depreciation to be treated as ordinary income, the holding period starts over for the new property. Can you file 2011 taxes now Example. Can you file 2011 taxes now The state paid you $116,000 when it condemned your depreciable real property for public use. Can you file 2011 taxes now You bought other real property similar in use to the property condemned for $110,000 ($15,000 for depreciable real property and $95,000 for land). Can you file 2011 taxes now You also bought stock for $5,000 to get control of a corporation owning property similar in use to the property condemned. Can you file 2011 taxes now You choose to postpone reporting the gain. Can you file 2011 taxes now If the transaction had been a sale for cash only, under the rules described earlier, $20,000 would have been reportable as ordinary income because of additional depreciation. Can you file 2011 taxes now The ordinary income to be reported is $6,000, which is the greater of the following amounts. Can you file 2011 taxes now The gain that must be reported under the rules for involuntary conversions, $1,000 ($116,000 − $115,000) plus the fair market value of stock bought as qualified replacement property, $5,000, for a total of $6,000. Can you file 2011 taxes now The gain you would have had to report as ordinary income from additional depreciation ($20,000) had this transaction been a cash sale minus the cost of the depreciable real property bought ($15,000), or $5,000. Can you file 2011 taxes now   The ordinary income not reported, $14,000 ($20,000 − $6,000), is carried over to the depreciable real property you bought as additional depreciation. Can you file 2011 taxes now Basis of property acquired. Can you file 2011 taxes now   If the ordinary income you have to report because of additional depreciation is limited, the total basis of the property you acquired is its fair market value (its cost, if bought to replace property involuntarily converted into money) minus the gain postponed. Can you file 2011 taxes now   If you acquired more than one item of property, allocate the total basis among the properties in proportion to their fair market value (their cost, in an involuntary conversion into money). Can you file 2011 taxes now However, if you acquired both depreciable real property and other property, allocate the total basis as follows. Can you file 2011 taxes now Subtract the ordinary income because of additional depreciation that you do not have to report from the fair market value (or cost) of the depreciable real property acquired. Can you file 2011 taxes now Add the fair market value (or cost) of the other property acquired to the result in (1). Can you file 2011 taxes now Divide the result in (1) by the result in (2). Can you file 2011 taxes now Multiply the total basis by the result in (3). Can you file 2011 taxes now This is the basis of the depreciable real property acquired. Can you file 2011 taxes now If you acquired more than one item of depreciable real property, allocate this basis amount among the properties in proportion to their fair market value (or cost). Can you file 2011 taxes now Subtract the result in (4) from the total basis. Can you file 2011 taxes now This is the basis of the other property acquired. Can you file 2011 taxes now If you acquired more than one item of other property, allocate this basis amount among the properties in proportion to their fair market value (or cost). Can you file 2011 taxes now Example 1. Can you file 2011 taxes now In 1988, low-income housing property that you acquired and placed in service in 1983 was destroyed by fire and you received a $90,000 insurance payment. Can you file 2011 taxes now The property's adjusted basis was $38,400, with additional depreciation of $14,932. Can you file 2011 taxes now On December 1, 1988, you used the insurance payment to acquire and place in service replacement low-income housing property. Can you file 2011 taxes now Your realized gain from the involuntary conversion was $51,600 ($90,000 − $38,400). Can you file 2011 taxes now You chose to postpone reporting the gain under the involuntary conversion rules. Can you file 2011 taxes now Under the rules for depreciation recapture on real property, the ordinary gain was $14,932, but you did not have to report any of it because of the limit for involuntary conversions. Can you file 2011 taxes now The basis of the replacement low-income housing property was its $90,000 cost minus the $51,600 gain you postponed, or $38,400. Can you file 2011 taxes now The $14,932 ordinary gain you did not report is treated as additional depreciation on the replacement property. Can you file 2011 taxes now If you sold the property in 2013, your holding period for figuring the applicable percentage of additional depreciation to report as ordinary income will have begun December 2, 1988, the day after you acquired the property. Can you file 2011 taxes now Example 2. Can you file 2011 taxes now John Adams received a $90,000 fire insurance payment for depreciable real property (office building) with an adjusted basis of $30,000. Can you file 2011 taxes now He uses the whole payment to buy property similar in use, spending $42,000 for depreciable real property and $48,000 for land. Can you file 2011 taxes now He chooses to postpone reporting the $60,000 gain realized on the involuntary conversion. Can you file 2011 taxes now Of this gain, $10,000 is ordinary income from additional depreciation but is not reported because of the limit for involuntary conversions of depreciable real property. Can you file 2011 taxes now The basis of the property bought is $30,000 ($90,000 − $60,000), allocated as follows. Can you file 2011 taxes now The $42,000 cost of depreciable real property minus $10,000 ordinary income not reported is $32,000. Can you file 2011 taxes now The $48,000 cost of other property (land) plus the $32,000 figured in (1) is $80,000. Can you file 2011 taxes now The $32,000 figured in (1) divided by the $80,000 figured in (2) is 0. Can you file 2011 taxes now 4. Can you file 2011 taxes now The basis of the depreciable real property is $12,000. Can you file 2011 taxes now This is the $30,000 total basis multiplied by the 0. Can you file 2011 taxes now 4 figured in (3). Can you file 2011 taxes now The basis of the other property (land) is $18,000. Can you file 2011 taxes now This is the $30,000 total basis minus the $12,000 figured in (4). Can you file 2011 taxes now The ordinary income that is not reported ($10,000) is carried over as additional depreciation to the depreciable real property that was bought and may be taxed as ordinary income on a later disposition. Can you file 2011 taxes now Multiple Properties If you dispose of depreciable property and other property in one transaction and realize a gain, you must allocate the amount realized between the two types of property in proportion to their respective fair market values to figure the part of your gain to be reported as ordinary income from depreciation. Can you file 2011 taxes now Different rules may apply to the allocation of the amount realized on the sale of a business that includes a group of assets. Can you file 2011 taxes now See chapter 2. Can you file 2011 taxes now In general, if a buyer and seller have adverse interests as to the allocation of the amount realized between the depreciable property and other property, any arm's length agreement between them will establish the allocation. Can you file 2011 taxes now In the absence of an agreement, the allocation should be made by taking into account the appropriate facts and circumstances. Can you file 2011 taxes now These include, but are not limited to, a comparison between the depreciable property and all the other property being disposed of in the transaction. Can you file 2011 taxes now The comparison should take into account all the following facts and circumstances. Can you file 2011 taxes now The original cost and reproduction cost of construction, erection, or production. Can you file 2011 taxes now The remaining economic useful life. Can you file 2011 taxes now The state of obsolescence. Can you file 2011 taxes now The anticipated expenditures required to maintain, renovate, or modernize the properties. Can you file 2011 taxes now Like-kind exchanges and involuntary conversions. Can you file 2011 taxes now   If you dispose of and acquire depreciable personal property and other property (other than depreciable real property) in a like-kind exchange or involuntary conversion, the amount realized is allocated in the following way. Can you file 2011 taxes now The amount allocated to the depreciable personal property disposed of is treated as consisting of, first, the fair market value of the depreciable personal property acquired and, second (to the extent of any remaining balance), the fair market value of the other property acquired. Can you file 2011 taxes now The amount allocated to the other property disposed of is treated as consisting of the fair market value of all property acquired that has not already been taken into account. Can you file 2011 taxes now   If you dispose of and acquire depreciable real property and other property in a like-kind exchange or involuntary conversion, the amount realized is allocated in the following way. Can you file 2011 taxes now The amount allocated to each of the three types of property (depreciable real property, depreciable personal property, or other property) disposed of is treated as consisting of, first, the fair market value of that type of property acquired and, second (to the extent of any remaining balance), any excess fair market value of the other types of property acquired. Can you file 2011 taxes now If the excess fair market value is more than the remaining balance of the amount realized and is from both of the other two types of property, you can apply the unallocated amount in any manner you choose. Can you file 2011 taxes now Example. Can you file 2011 taxes now A fire destroyed your property with a total fair market value of $50,000. Can you file 2011 taxes now It consisted of machinery worth $30,000 and nondepreciable property worth $20,000. Can you file 2011 taxes now You received an insurance payment of $40,000 and immediately used it with $10,000 of your own funds (for a total of $50,000) to buy machinery with a fair market value of $15,000 and nondepreciable property with a fair market value of $35,000. Can you file 2011 taxes now The adjusted basis of the destroyed machinery was $5,000 and your depreciation on it was $35,000. Can you file 2011 taxes now You choose to postpone reporting your gain from the involuntary conversion. Can you file 2011 taxes now You must report $9,000 as ordinary income from depreciation arising from this transaction, figured as follows. Can you file 2011 taxes now The $40,000 insurance payment must be allocated between the machinery and the other property destroyed in proportion to the fair market value of each. Can you file 2011 taxes now The amount allocated to the machinery is 30,000/50,000 × $40,000, or $24,000. Can you file 2011 taxes now The amount allocated to the other property is 20,000/50,000 × $40,000, or $16,000. Can you file 2011 taxes now Your gain on the involuntary conversion of the machinery is $24,000 minus $5,000 adjusted basis, or $19,000. Can you file 2011 taxes now The $24,000 allocated to the machinery disposed of is treated as consisting of the $15,000 fair market value of the replacement machinery bought and $9,000 of the fair market value of other property bought in the transaction. Can you file 2011 taxes now All $16,000 allocated to the other property disposed of is treated as consisting of the fair market value of the other property that was bought. Can you file 2011 taxes now Your potential ordinary income from depreciation is $19,000, the gain on the machinery, because it is less than the $35,000 depreciation. Can you file 2011 taxes now However, the amount you must report as ordinary income is limited to the $9,000 included in the amount realized for the machinery that represents the fair market value of property other than the depreciable property you bought. Can you file 2011 taxes now Prev  Up  Next   Home   More Online Publications
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International Taxpayer

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A Taxpayer Identification Number (TIN) is an identification number used by the Internal Revenue Service (IRS) in the administration of tax laws.

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Tax treaties may allow residents of foreign countries to be taxed at a reduced rate, or to be exempt from U.S. income taxes on certain items of income they receive from sources within the United States.

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This section covers tax topics for U.S. citizens or resident aliens living overseas.

Taxation of Nonresident Aliens
The U.S. source income of nonresident aliens is subject to U.S. taxation.

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If you are a taxpayer who resides outside of the United States, the IRS has staff in four U.S. embassies and consulates. These offices have tax forms and publications, can help you with account problems, and answer your questions about notices and bills.

Federal Unemployment Tax
Information about the Federal Unemployment Tax Act (FUTA), with state unemployment systems, which provides for payments of unemployment compensation to workers who have lost their jobs.

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Withholding Exemptions - Personal Exemptions - Form W-4
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Taxation of U.S. Resident Aliens
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Page Last Reviewed or Updated: 25-Mar-2014

The Can You File 2011 Taxes Now

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