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Free 1040x forms prepared online Publication 570 - Additional Material Table of Contents This image is too large to be displayed in the current screen. Free 1040x forms prepared online Please click the link to view the image. Free 1040x forms prepared online Tax Publications for Business Taxpayers Prev  Up  Next   Home   More Online Publications
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Free 1040x forms prepared online 11. Free 1040x forms prepared online   Casualties, Thefts, and Condemnations Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Casualties and TheftsDeductible losses. Free 1040x forms prepared online Nondeductible losses. Free 1040x forms prepared online Family pet. Free 1040x forms prepared online Progressive deterioration. Free 1040x forms prepared online Decline in market value of stock. Free 1040x forms prepared online Mislaid or lost property. Free 1040x forms prepared online Farming Losses How To Figure a Loss Deduction Limits on Losses of Personal-Use Property When Loss Is Deductible Proof of Loss Figuring a Gain Other Involuntary ConversionsCondemnation Irrigation Project Livestock Losses Tree Seedlings Postponing GainException. Free 1040x forms prepared online Related persons. Free 1040x forms prepared online Replacement Property Replacement Period How To Postpone Gain Disaster Area LossesWho is eligible. Free 1040x forms prepared online Covered disaster area. Free 1040x forms prepared online Reporting Gains and Losses Introduction This chapter explains the tax treatment of casualties, thefts, and condemnations. Free 1040x forms prepared online A casualty occurs when property is damaged, destroyed, or lost due to a sudden, unexpected, or unusual event. Free 1040x forms prepared online A theft occurs when property is stolen. Free 1040x forms prepared online A condemnation occurs when private property is legally taken for public use without the owner's consent. Free 1040x forms prepared online A casualty, theft, or condemnation may result in a deductible loss or taxable gain on your federal income tax return. Free 1040x forms prepared online You may have a deductible loss or a taxable gain even if only a portion of your property was affected by a casualty, theft, or condemnation. Free 1040x forms prepared online An involuntary conversion occurs when you receive money or other property as reimbursement for a casualty, theft, condemnation, disposition of property under threat of condemnation, or certain other events discussed in this chapter. Free 1040x forms prepared online If an involuntary conversion results in a gain and you buy qualified replacement property within the specified replacement period, you can postpone reporting the gain on your income tax return. Free 1040x forms prepared online For more information, see Postponing Gain , later. Free 1040x forms prepared online Topics - This chapter discusses: Casualties and thefts How to figure a loss or gain Other involuntary conversions Postponing gain Disaster area losses Reporting gains and losses Drought involving property connected with a trade or business or a transaction entered into for profit Useful Items - You may want to see: Publication 523 Selling Your Home 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 544 Sales and Other Dispositions of Assets 547 Casualties, Disasters, and Thefts 584 Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property) 584-B Business Casualty, Disaster, and Theft Loss Workbook Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch D (Form 1040) Capital Gains and Losses Sch F (Form 1040) Profit or Loss From Farming 4684 Casualties and Thefts 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Free 1040x forms prepared online Casualties and Thefts If your property is destroyed, damaged, or stolen, you may have a deductible loss. Free 1040x forms prepared online If the insurance or other reimbursement is more than the adjusted basis of the destroyed, damaged, or stolen property, you may have a taxable gain. Free 1040x forms prepared online Casualty. Free 1040x forms prepared online   A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Free 1040x forms prepared online A sudden event is one that is swift, not gradual or progressive. Free 1040x forms prepared online An unexpected event is one that is ordinarily unanticipated and unintended. Free 1040x forms prepared online 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. Free 1040x forms prepared online Deductible losses. Free 1040x forms prepared online   Deductible casualty losses can result from a number of different causes, including the following. Free 1040x forms prepared online Airplane crashes. Free 1040x forms prepared online Car, truck, or farm equipment accidents not resulting from your willful act or willful negligence. Free 1040x forms prepared online Earthquakes. Free 1040x forms prepared online Fires (but see Nondeductible losses next for exceptions). Free 1040x forms prepared online Floods. Free 1040x forms prepared online Freezing. Free 1040x forms prepared online Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses, in Publication 547. Free 1040x forms prepared online Lightning. Free 1040x forms prepared online Storms, including hurricanes and tornadoes. Free 1040x forms prepared online Terrorist attacks. Free 1040x forms prepared online Vandalism. Free 1040x forms prepared online Volcanic eruptions. Free 1040x forms prepared online Nondeductible losses. Free 1040x forms prepared online   A casualty loss is not deductible if the damage or destruction is caused by the following. Free 1040x forms prepared online Accidentally breaking articles such as glassware or china under normal conditions. Free 1040x forms prepared online A family pet (explained below). Free 1040x forms prepared online A fire if you willfully set it, or pay someone else to set it. Free 1040x forms prepared online A car, truck, or farm equipment accident if your willful negligence or willful act caused it. Free 1040x forms prepared online The same is true if the willful act or willful negligence of someone acting for you caused the accident. Free 1040x forms prepared online Progressive deterioration (explained below). Free 1040x forms prepared online Family pet. Free 1040x forms prepared online   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed above under Casualty are met. Free 1040x forms prepared online Example. Free 1040x forms prepared online You keep your horse in your yard. Free 1040x forms prepared online The ornamental fruit trees in your yard were damaged when your horse stripped the bark from them. Free 1040x forms prepared online Some of the trees were completely girdled and died. Free 1040x forms prepared online Because the damage was not unexpected or unusual, the loss is not deductible. Free 1040x forms prepared online Progressive deterioration. Free 1040x forms prepared online   Loss of property due to progressive deterioration is not deductible as a casualty loss. Free 1040x forms prepared online This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Free 1040x forms prepared online Examples of damage due to progressive deterioration include damage from rust, corrosion, or termites. Free 1040x forms prepared online However, weather-related conditions or disease may cause another type of involuntary conversion. Free 1040x forms prepared online See Other Involuntary Conversions , later. Free 1040x forms prepared online Theft. Free 1040x forms prepared online   A theft is the taking and removing of money or property with the intent to deprive the owner of it. Free 1040x forms prepared online 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. Free 1040x forms prepared online You do not need to show a conviction for theft. Free 1040x forms prepared online   Theft includes the taking of money or property by the following means: Blackmail, Burglary, Embezzlement, Extortion, Kidnapping for ransom, Larceny, Robbery, or Threats. Free 1040x forms prepared online The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Free 1040x forms prepared online Decline in market value of stock. Free 1040x forms prepared online   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. Free 1040x forms prepared online 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. Free 1040x forms prepared online You report a capital loss on Schedule D (Form 1040). Free 1040x forms prepared online For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Free 1040x forms prepared online Mislaid or lost property. Free 1040x forms prepared online   The simple disappearance of money or property is not a theft. Free 1040x forms prepared online 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. Free 1040x forms prepared online Example. Free 1040x forms prepared online A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Free 1040x forms prepared online The diamond falls from the ring and is never found. Free 1040x forms prepared online The loss of the diamond is a casualty. Free 1040x forms prepared online Farming Losses You can deduct certain casualty or theft losses that occur in the business of farming. Free 1040x forms prepared online The following is a discussion of some losses you can deduct and some you cannot deduct. Free 1040x forms prepared online Livestock or produce bought for resale. Free 1040x forms prepared online   Casualty or theft losses of livestock or produce bought for resale are deductible if you report your income on the cash method. Free 1040x forms prepared online If you report your income on an accrual method, take casualty and theft losses on property bought for resale by omitting the item from the closing inventory for the year of the loss. Free 1040x forms prepared online You cannot take a separate deduction. Free 1040x forms prepared online Livestock, plants, produce, and crops raised for sale. Free 1040x forms prepared online   Losses of livestock, plants, produce, and crops raised for sale are generally not deductible if you report your income on the cash method. Free 1040x forms prepared online You have already deducted the cost of raising these items as farm expenses, so their basis is equal to zero. Free 1040x forms prepared online   For plants with a preproductive period of more than 2 years, you may have a deductible loss if you have a tax basis in the plants. Free 1040x forms prepared online You usually have a tax basis if you capitalized the expenses associated with these plants under the uniform capitalization rules. Free 1040x forms prepared online The uniform capitalization rules are discussed in chapter 6. Free 1040x forms prepared online   If you report your income on an accrual method, casualty or theft losses are deductible only if you included the items in your inventory at the beginning of your tax year. Free 1040x forms prepared online You get the deduction by omitting the item from your inventory at the close of your tax year. Free 1040x forms prepared online You cannot take a separate casualty or theft deduction. Free 1040x forms prepared online Income loss. Free 1040x forms prepared online   A loss of future income is not deductible. Free 1040x forms prepared online Example. Free 1040x forms prepared online A severe flood destroyed your crops. Free 1040x forms prepared online Because you are a cash method taxpayer and already deducted the cost of raising the crops as farm expenses, this loss is not deductible, as explained above under Livestock, plants, produce, and crops raised for sale . Free 1040x forms prepared online You estimate that the crop loss will reduce your farm income by $25,000. Free 1040x forms prepared online This loss of future income is also not deductible. Free 1040x forms prepared online Loss of timber. Free 1040x forms prepared online   If you sell timber downed as a result of a casualty, treat the proceeds from the sale as a reimbursement. Free 1040x forms prepared online If you use the proceeds to buy qualified replacement property, you can postpone reporting the gain. Free 1040x forms prepared online See Postponing Gain , later. Free 1040x forms prepared online Property used in farming. Free 1040x forms prepared online   Casualty and theft losses of property used in your farm business usually result in deductible losses. Free 1040x forms prepared online If a fire or storm destroyed your barn, or you lose by casualty or theft an animal you bought for draft, breeding, dairy, or sport, you may have a deductible loss. Free 1040x forms prepared online See How To Figure a Loss , later. Free 1040x forms prepared online Raised draft, breeding, dairy, or sporting animals. Free 1040x forms prepared online   Generally, losses of raised draft, breeding, dairy, or sporting animals do not result in deductible casualty or theft losses because you have no basis in the animals. Free 1040x forms prepared online However, you may have a basis in the animal and therefore may be able to claim a deduction if either of the following situations applies to you. Free 1040x forms prepared online You use inventories to determine your income and you included the animals in your inventory. Free 1040x forms prepared online You capitalized the expenses associated with the animals under the uniform capitalization rules and therefore have a tax basis in the animals subject to a casualty or theft. Free 1040x forms prepared online When you include livestock in inventory, its last inventory value is its basis. Free 1040x forms prepared online When you lose an inventoried animal held for draft, breeding, dairy, or sport by casualty or theft during the year, decrease ending inventory by the amount you included in inventory for the animal. Free 1040x forms prepared online You cannot take a separate deduction. Free 1040x forms prepared online How To Figure a Loss How you figure a deductible casualty or theft loss depends on whether the loss was to farm or personal-use property and whether the property was stolen or partly or completely destroyed. Free 1040x forms prepared online Farm property. Free 1040x forms prepared online   Farm property is the property you use in your farming business. Free 1040x forms prepared online If your farm property was completely destroyed or stolen, your loss is figured as follows:      Your adjusted basis in the property     MINUS     Any salvage value     MINUS     Any insurance or other reimbursement you  receive or expect to receive      You can use the schedules in Publication 584-B to list your stolen, damaged, or destroyed business property and to figure your loss. Free 1040x forms prepared online   If your farm property was partially damaged, use the steps shown under Personal-use property next to figure your casualty loss. Free 1040x forms prepared online However, the deduction limits, discussed later, do not apply to farm property. Free 1040x forms prepared online Personal-use property. Free 1040x forms prepared online   Personal-use property is property used by you or your family members for personal purposes and not used in your farm business or for income-producing purposes. Free 1040x forms prepared online The following items are examples of personal-use property: Your main home. Free 1040x forms prepared online Furniture and electronics used in your main home and not used in a home office or for business purposes. Free 1040x forms prepared online Clothing and jewelry. Free 1040x forms prepared online An automobile used for nonbusiness purposes. Free 1040x forms prepared online You figure the casualty or theft loss on this property by taking the following steps. Free 1040x forms prepared online Determine your adjusted basis in the property before the casualty or theft. Free 1040x forms prepared online Determine the decrease in fair market value of the property as a result of the casualty or theft. Free 1040x forms prepared online From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you receive or expect to receive. Free 1040x forms prepared online You must apply the deduction limits, discussed later, to determine your deductible loss. Free 1040x forms prepared online    You can use Publication 584 to list your stolen or damaged personal-use property and figure your loss. Free 1040x forms prepared online It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. Free 1040x forms prepared online Adjusted basis. Free 1040x forms prepared online   Adjusted basis is your basis (usually cost) increased or decreased by various events, such as improvements and casualty losses. Free 1040x forms prepared online For more information about adjusted basis, see chapter 6. Free 1040x forms prepared online Decrease in fair market value (FMV). Free 1040x forms prepared online   The decrease in FMV is the difference between the property's value immediately before the casualty or theft and its value immediately afterward. Free 1040x forms prepared online FMV is defined in chapter 10 under Payments Received or Considered Received . Free 1040x forms prepared online Appraisal. Free 1040x forms prepared online   To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. Free 1040x forms prepared online But other measures, such as the cost of cleaning up or making repairs (discussed next) can be used to establish decreases in FMV. Free 1040x forms prepared online   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterward should be made by a competent appraiser. Free 1040x forms prepared online The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Free 1040x forms prepared online This information is needed to limit any deduction to the actual loss resulting from damage to the property. Free 1040x forms prepared online Cost of cleaning up or making repairs. Free 1040x forms prepared online   The cost of cleaning up after a casualty is not part of a casualty loss. Free 1040x forms prepared online Neither is the cost of repairing damaged property after a casualty. Free 1040x forms prepared online But you can use the cost of cleaning up or making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. Free 1040x forms prepared online The repairs are actually made. Free 1040x forms prepared online The repairs are necessary to bring the property back to its condition before the casualty. Free 1040x forms prepared online The amount spent for repairs is not excessive. Free 1040x forms prepared online The repairs fix the damage only. Free 1040x forms prepared online The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Free 1040x forms prepared online Related expenses. Free 1040x forms prepared online   The incidental expenses due to a casualty or theft, such as expenses for the treatment of personal injuries, temporary housing, or a rental car, are not part of your casualty or theft loss. Free 1040x forms prepared online However, they may be deductible as farm business expenses if the damaged or stolen property is farm property. Free 1040x forms prepared online Separate computations for more than one item of property. Free 1040x forms prepared online   Generally, if a single casualty or theft involves more than one item of property, you must figure your loss separately for each item of property. Free 1040x forms prepared online Then combine the losses to determine your total loss. Free 1040x forms prepared online    There is an exception to this rule for personal-use real property. Free 1040x forms prepared online See Exception for personal-use real property, later. Free 1040x forms prepared online Example. Free 1040x forms prepared online A fire on your farm damaged a tractor and the barn in which it was stored. Free 1040x forms prepared online The tractor had an adjusted basis of $3,300. Free 1040x forms prepared online Its FMV was $28,000 just before the fire and $10,000 immediately afterward. Free 1040x forms prepared online The barn had an adjusted basis of $28,000. Free 1040x forms prepared online Its FMV was $55,000 just before the fire and $25,000 immediately afterward. Free 1040x forms prepared online You received insurance reimbursements of $2,100 on the tractor and $26,000 on the barn. Free 1040x forms prepared online Figure your deductible casualty loss separately for the two items of property. Free 1040x forms prepared online     Tractor Barn 1) Adjusted basis $3,300 $28,000 2) FMV before fire $28,000 $55,000 3) FMV after fire 10,000 25,000 4) Decrease in FMV  (line 2 − line 3) $18,000 $30,000 5) Loss (lesser of line 1 or line 4) $3,300 $28,000 6) Minus: Insurance 2,100 26,000 7) Deductible casualty loss $1,200 $2,000 8) Total deductible casualty loss $3,200 Exception for personal-use real property. Free 1040x forms prepared online   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. Free 1040x forms prepared online Figure the loss using the smaller of the following. Free 1040x forms prepared online The decrease in FMV of the entire property. Free 1040x forms prepared online The adjusted basis of the entire property. Free 1040x forms prepared online Example. Free 1040x forms prepared online You bought a farm in 1990 for $160,000. Free 1040x forms prepared online The adjusted basis of the residential part is now $128,000. Free 1040x forms prepared online In 2013, a windstorm blew down shade trees and three ornamental trees planted at a cost of $7,500 on the residential part. Free 1040x forms prepared online The adjusted basis of the residential part includes the $7,500. Free 1040x forms prepared online The fair market value (FMV) of the residential part immediately before the storm was $400,000, and $385,000 immediately after the storm. Free 1040x forms prepared online The trees were not covered by insurance. Free 1040x forms prepared online 1) Adjusted basis $128,000 2) FMV before the storm $400,000 3) FMV after the storm 385,000 4) Decrease in FMV (line 2 − line 3) $15,000 5) Loss before insurance (lesser of line 1 or line 4) $15,000 6) Minus: Insurance -0- 7) Amount of loss $15,000 Insurance and other reimbursements. Free 1040x forms prepared online   If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Free 1040x forms prepared online You do not have a casualty or theft loss to the extent you are reimbursed. Free 1040x forms prepared online   If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Free 1040x forms prepared online You must reduce your loss even if you do not receive payment until a later tax year. Free 1040x forms prepared online    Do not subtract from your loss any insurance payments you receive for living expenses if you lose the use of your main home or are denied access to it because of a casualty. Free 1040x forms prepared online You may have to include a portion of these payments in your income. Free 1040x forms prepared online See Insurance payments for living expenses in Publication 547 for details. Free 1040x forms prepared online Disaster relief. Free 1040x forms prepared online   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. Free 1040x forms prepared online Excludable cash gifts you receive also do not reduce your casualty loss if there are no limits on how you can use the money. Free 1040x forms prepared online   Generally, disaster relief grants received under the Robert T. Free 1040x forms prepared online Stafford Disaster Relief and Emergency Assistance Act are not included in your income. Free 1040x forms prepared online See Federal disaster relief grants , later, under Disaster Area Losses . Free 1040x forms prepared online   Qualified disaster relief payments for expenses you incurred as a result of a federally declared disaster are not taxable income to you. Free 1040x forms prepared online See Qualified disaster relief payments , later, under Disaster Area Losses . Free 1040x forms prepared online Reimbursement received after deducting loss. Free 1040x forms prepared online   If you figure your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you get your actual reimbursement. Free 1040x forms prepared online Actual reimbursement less than expected. Free 1040x forms prepared online   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. Free 1040x forms prepared online Actual reimbursement more than expected. Free 1040x forms prepared online   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. Free 1040x forms prepared online However, if any part of your original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. Free 1040x forms prepared online Do not refigure your tax for the year you claimed the deduction. Free 1040x forms prepared online See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. Free 1040x forms prepared online 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. Free 1040x forms prepared online See Figuring a Gain in Publication 547 for information on how to treat a gain from the reimbursement you receive because of a casualty or theft. Free 1040x forms prepared online Actual reimbursement same as expected. Free 1040x forms prepared online   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. Free 1040x forms prepared online Lump-sum reimbursement. Free 1040x forms prepared online   If you have a casualty or theft loss of several assets at the same time without an allocation of reimbursement to specific assets, divide the lump-sum reimbursement among the assets according to the fair market value of each asset at the time of the loss. Free 1040x forms prepared online Figure the gain or loss separately for each asset that has a separate basis. Free 1040x forms prepared online Adjustments to basis. Free 1040x forms prepared online   If you have a casualty or theft loss, you must decrease your basis in the property by any insurance or other reimbursement you receive and by any deductible loss. Free 1040x forms prepared online The result is your adjusted basis in the property. Free 1040x forms prepared online Amounts you spend on repairs to restore your property to its pre-casualty condition increase your adjusted basis. Free 1040x forms prepared online See Adjusted Basis in chapter 6 for more information. Free 1040x forms prepared online Example. Free 1040x forms prepared online You built a new silo for $25,000. Free 1040x forms prepared online This is the basis in your silo because that is the total cost you incurred to build it. Free 1040x forms prepared online During the year, a tornado damaged your silo and your allowable casualty loss deduction was $1,000. Free 1040x forms prepared online In addition, your insurance company reimbursed you $4,000 for the damage and you spent $6,000 to restore the silo to its pre-casualty condition. Free 1040x forms prepared online Your adjusted basis in the silo after the casualty is $26,000 ($25,000 - $1,000 - $4,000 + $6,000). Free 1040x forms prepared online Deduction Limits on Losses of Personal-Use Property Casualty and theft losses of property held for personal use may be deductible if you itemize deductions on Schedule A (Form 1040). Free 1040x forms prepared online There are two limits on the deduction for casualty or theft loss of personal-use property. Free 1040x forms prepared online You figure these limits on Form 4684. Free 1040x forms prepared online $100 rule. Free 1040x forms prepared online   You must reduce each casualty or theft loss on personal-use property by $100. Free 1040x forms prepared online This rule applies after you have subtracted any reimbursement. Free 1040x forms prepared online 10% rule. Free 1040x forms prepared online   You must further reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. Free 1040x forms prepared online Apply this rule after you reduce each loss by $100. Free 1040x forms prepared online Adjusted gross income is on line 38 of Form 1040. Free 1040x forms prepared online Example. Free 1040x forms prepared online In June, you discovered that your house had been burglarized. Free 1040x forms prepared online Your loss after insurance reimbursement was $2,000. Free 1040x forms prepared online Your adjusted gross income for the year you discovered the burglary is $57,000. Free 1040x forms prepared online Figure your theft loss deduction as follows: 1. Free 1040x forms prepared online Loss after insurance $2,000 2. Free 1040x forms prepared online Subtract $100 100 3. Free 1040x forms prepared online Loss after $100 rule $1,900 4. Free 1040x forms prepared online Subtract 10% (. Free 1040x forms prepared online 10) × $57,000 AGI $5,700 5. Free 1040x forms prepared online Theft loss deduction -0- You do not have a theft loss deduction because your loss ($1,900) is less than 10% of your adjusted gross income ($5,700). Free 1040x forms prepared online    If you have a casualty or theft gain in addition to a loss, you will have to make a special computation before you figure your 10% limit. Free 1040x forms prepared online See 10% Rule in Publication 547. Free 1040x forms prepared online When Loss Is Deductible Generally, you can deduct casualty losses that are not reimbursable only in the tax year in which they occur. Free 1040x forms prepared online You generally can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. Free 1040x forms prepared online However, losses in federally declared disaster areas are subject to different rules. Free 1040x forms prepared online See Disaster Area Losses , later, for an exception. Free 1040x forms prepared online If you are not sure whether part of your casualty or theft loss will be reimbursed, do not deduct that part until the tax year when you become reasonably certain that it will not be reimbursed. Free 1040x forms prepared online Leased property. Free 1040x forms prepared online   If you lease property from someone else, you can deduct a loss on the property in the year your liability for the loss is fixed. Free 1040x forms prepared online This is true even if the loss occurred or the liability was paid in a different year. Free 1040x forms prepared online You are not entitled to a deduction until your liability under the lease can be determined with reasonable accuracy. Free 1040x forms prepared online Your liability can be determined when a claim for recovery is settled, adjudicated, or abandoned. Free 1040x forms prepared online Example. Free 1040x forms prepared online Robert leased a tractor from First Implement, Inc. Free 1040x forms prepared online , for use in his farm business. Free 1040x forms prepared online The tractor was destroyed by a tornado in June 2012. Free 1040x forms prepared online The loss was not insured. Free 1040x forms prepared online First Implement billed Robert for the fair market value of the tractor on the date of the loss. Free 1040x forms prepared online Robert disagreed with the bill and refused to pay it. Free 1040x forms prepared online First Implement later filed suit in court against Robert. Free 1040x forms prepared online In 2013, Robert and First Implement agreed to settle the suit for $20,000, and the court entered a judgment in favor of First Implement. Free 1040x forms prepared online Robert paid $20,000 in June 2013. Free 1040x forms prepared online He can claim the $20,000 as a loss on his 2013 tax return. Free 1040x forms prepared online Net operating loss (NOL). Free 1040x forms prepared online   If your deductions, including casualty or theft loss deductions, are more than your income for the year, you may have an NOL. Free 1040x forms prepared online An NOL can be carried back or carried forward and deducted from income in other years. Free 1040x forms prepared online See Publication 536 for more information on NOLs. Free 1040x forms prepared online Proof of Loss To deduct a casualty or theft loss, you must be able to prove that there was a casualty or theft. Free 1040x forms prepared online You must have records to support the amount you claim for the loss. Free 1040x forms prepared online Casualty loss proof. Free 1040x forms prepared online   For a casualty loss, your records should show all the following information. Free 1040x forms prepared online The type of casualty (car accident, fire, storm, etc. Free 1040x forms prepared online ) and when it occurred. Free 1040x forms prepared online That the loss was a direct result of the casualty. Free 1040x forms prepared online 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. Free 1040x forms prepared online Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Free 1040x forms prepared online Theft loss proof. Free 1040x forms prepared online   For a theft loss, your records should show all the following information. Free 1040x forms prepared online When you discovered your property was missing. Free 1040x forms prepared online That your property was stolen. Free 1040x forms prepared online That you were the owner of the property. Free 1040x forms prepared online Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Free 1040x forms prepared online Figuring a Gain A casualty or theft may result in a taxable gain. Free 1040x forms prepared online 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. Free 1040x forms prepared online You generally report your gain as income in the year you receive the reimbursement. Free 1040x forms prepared online However, depending on the type of property you receive, you may not have to report your gain. Free 1040x forms prepared online See Postponing Gain , later. Free 1040x forms prepared online Your gain is figured as follows: The amount you receive, minus Your adjusted basis in the property at the time of the casualty or theft. Free 1040x forms prepared online 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. Free 1040x forms prepared online Amount you receive. Free 1040x forms prepared online   The amount you receive includes any money plus the value of any property you receive, minus any expenses you have in obtaining reimbursement. Free 1040x forms prepared online It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. Free 1040x forms prepared online Example. Free 1040x forms prepared online A tornado severely damaged your barn. Free 1040x forms prepared online The adjusted basis of the barn was $25,000. Free 1040x forms prepared online Your insurance company reimbursed you $40,000 for the damaged barn. Free 1040x forms prepared online However, you had legal expenses of $2,000 to collect that insurance. Free 1040x forms prepared online Your insurance minus your expenses to collect the insurance is more than your adjusted basis in the barn, so you have a gain. Free 1040x forms prepared online 1) Insurance reimbursement $40,000 2) Legal expenses 2,000 3) Amount received  (line 1 − line 2) $38,000 4) Adjusted basis 25,000 5) Gain on casualty (line 3 − line 4) $13,000 Other Involuntary Conversions In addition to casualties and thefts, other events cause involuntary conversions of property. Free 1040x forms prepared online Some of these are discussed in the following paragraphs. Free 1040x forms prepared online Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes. Free 1040x forms prepared online You report the gain or deduct the loss on your tax return for the year you realize it. Free 1040x forms prepared online However, depending on the type of property you receive, you may not have to report your gain on the involuntary conversion. Free 1040x forms prepared online See Postponing Gain , later. Free 1040x forms prepared online Condemnation Condemnation is the process by which private property is legally taken for public use without the owner's consent. Free 1040x forms prepared online The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take property. Free 1040x forms prepared online The owner receives a condemnation award (money or property) in exchange for the property taken. Free 1040x forms prepared online A condemnation is a forced sale, the owner being the seller and the condemning authority being the buyer. Free 1040x forms prepared online Threat of condemnation. Free 1040x forms prepared online   Treat the sale of your property under threat of condemnation as a condemnation, provided you have reasonable grounds to believe that your property will be condemned. Free 1040x forms prepared online Main home condemned. Free 1040x forms prepared online   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. Free 1040x forms prepared online For information on this exclusion, see Publication 523. Free 1040x forms prepared online 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. Free 1040x forms prepared online See Postponing Gain , later. Free 1040x forms prepared online (You cannot deduct a loss from the condemnation of your main home. Free 1040x forms prepared online ) More information. Free 1040x forms prepared online   For information on how to figure the gain or loss on condemned property, see chapter 1 in Publication 544. Free 1040x forms prepared online Also see Postponing Gain , later, to find out if you can postpone reporting the gain. Free 1040x forms prepared online Irrigation Project The sale or other disposition of property located within an irrigation project to conform to the acreage limits of federal reclamation laws is an involuntary conversion. Free 1040x forms prepared online Livestock Losses Diseased livestock. Free 1040x forms prepared online   If your livestock die from disease, or are destroyed, sold, or exchanged because of disease, even though the disease is not of epidemic proportions, treat these occurrences as involuntary conversions. Free 1040x forms prepared online If the livestock were raised or purchased for resale, follow the rules for livestock discussed earlier under Farming Losses . Free 1040x forms prepared online Otherwise, figure the gain or loss from these conversions using the rules discussed under Determining Gain or Loss in chapter 8. Free 1040x forms prepared online If you replace the livestock, you may be able to postpone reporting the gain. Free 1040x forms prepared online See Postponing Gain below. Free 1040x forms prepared online Reporting dispositions of diseased livestock. Free 1040x forms prepared online   If you choose to postpone reporting gain on the disposition of diseased livestock, you must attach a statement to your return explaining that the livestock were disposed of because of disease. Free 1040x forms prepared online You must also include other information on this statement. Free 1040x forms prepared online See How To Postpone Gain , later, under Postponing Gain . Free 1040x forms prepared online Weather-related sales of livestock. Free 1040x forms prepared online   If you sell or exchange livestock (other than poultry) held for draft, breeding, or dairy purposes solely because of drought, flood, or other weather-related conditions, treat the sale or exchange as an involuntary conversion. Free 1040x forms prepared online Only livestock sold in excess of the number you normally would sell under usual business practice, in the absence of weather-related conditions, are considered involuntary conversions. Free 1040x forms prepared online Figure the gain or loss using the rules discussed under Determining Gain or Loss in chapter 8. Free 1040x forms prepared online If you replace the livestock, you may be able to postpone reporting the gain. Free 1040x forms prepared online See Postponing Gain below. Free 1040x forms prepared online Example. Free 1040x forms prepared online It is your usual business practice to sell five of your dairy animals during the year. Free 1040x forms prepared online This year you sold 20 dairy animals because of drought. Free 1040x forms prepared online The sale of 15 animals is treated as an involuntary conversion. Free 1040x forms prepared online    If you do not replace the livestock, you may be able to report the gain in the following year's income. Free 1040x forms prepared online This rule also applies to other livestock (including poultry). Free 1040x forms prepared online See Sales Caused by Weather-Related Conditions in chapter 3. Free 1040x forms prepared online Tree Seedlings If, because of an abnormal drought, the failure of planted tree seedlings is greater than normally anticipated, you may have a deductible loss. Free 1040x forms prepared online Treat the loss as a loss from an involuntary conversion. Free 1040x forms prepared online The loss equals the previously capitalized reforestation costs you had to duplicate on replanting. Free 1040x forms prepared online You deduct the loss on the return for the year the seedlings died. Free 1040x forms prepared online Postponing Gain Do not report a gain if you receive reimbursement in the form of property similar or related in service or use to the destroyed, stolen, or other involuntarily converted property. Free 1040x forms prepared online Your basis in the new property is generally the same as your adjusted basis in the property it replaces. Free 1040x forms prepared online You must ordinarily report the gain on your stolen, destroyed, or other involuntarily converted property if you receive money or unlike property as reimbursement. Free 1040x forms prepared online However, you can choose to postpone reporting the gain if you purchase replacement property similar or related in service or use to your destroyed, stolen, or other involuntarily converted property within a specific replacement period. Free 1040x forms prepared online If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. Free 1040x forms prepared online To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. Free 1040x forms prepared online 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. Free 1040x forms prepared online Example 1. Free 1040x forms prepared online In 1985, you constructed a barn to store farm equipment at a cost of $20,000. Free 1040x forms prepared online In 1987, you added a silo to the barn at a cost of $15,000 to store grain. Free 1040x forms prepared online In May of this year, the property was worth $100,000. Free 1040x forms prepared online In June the barn and silo were destroyed by a tornado. Free 1040x forms prepared online At the time of the tornado, you had an adjusted basis of $0 in the property. Free 1040x forms prepared online You received $85,000 from the insurance company. Free 1040x forms prepared online You had a gain of $85,000 ($85,000 – $0). Free 1040x forms prepared online You spent $80,000 to rebuild the barn and silo. Free 1040x forms prepared online Since this is less than the insurance proceeds received, you must include $5,000 ($85,000 – $80,000) in your income. Free 1040x forms prepared online Example 2. Free 1040x forms prepared online In 1970, you bought a cabin in the mountains for your personal use at a cost of $18,000. Free 1040x forms prepared online You made no further improvements or additions to it. Free 1040x forms prepared online When a storm destroyed the cabin this January, the cabin was worth $250,000. Free 1040x forms prepared online You received $146,000 from the insurance company in March. Free 1040x forms prepared online You had a gain of $128,000 ($146,000 − $18,000). Free 1040x forms prepared online You spent $144,000 to rebuild the cabin. Free 1040x forms prepared online Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. Free 1040x forms prepared online Buying replacement property from a related person. Free 1040x forms prepared online   You cannot postpone reporting a gain from a casualty, theft, or other involuntary conversion if you buy the replacement property from a related person (discussed later). Free 1040x forms prepared online This rule applies to the following taxpayers. Free 1040x forms prepared online C corporations. Free 1040x forms prepared online Partnerships in which more than 50% of the capital or profits interest is owned by C corporations. Free 1040x forms prepared online Individuals, partnerships (other than those in (2) above), and S corporations if the total realized gain for the tax year on all involuntarily converted properties on which there are realized gains is more than $100,000. Free 1040x forms prepared online For involuntary conversions described in (3) above, gains cannot be offset by any losses when determining whether the total gain is more than $100,000. Free 1040x forms prepared online If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Free 1040x forms prepared online If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Free 1040x forms prepared online Exception. Free 1040x forms prepared online   This rule does not apply if the related person acquired the property from an unrelated person within the period of time allowed for replacing the involuntarily converted property. Free 1040x forms prepared online Related persons. Free 1040x forms prepared online   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. Free 1040x forms prepared online For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Free 1040x forms prepared online Death of a taxpayer. Free 1040x forms prepared online   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. Free 1040x forms prepared online The executor of the estate or the person succeeding to the funds from the involuntary conversion cannot postpone reporting the gain by buying replacement property. Free 1040x forms prepared online Replacement Property You must buy replacement property for the specific purpose of replacing your property. Free 1040x forms prepared online Your replacement property must be similar or related in service or use to the property it replaces. Free 1040x forms prepared online You do not have to use the same funds you receive as reimbursement for your old property to acquire the replacement property. Free 1040x forms prepared online If you spend the money you receive for other purposes, and borrow money to buy replacement property, you can still choose to postpone reporting the gain if you meet the other requirements. Free 1040x forms prepared online Property you acquire by gift or inheritance does not qualify as replacement property. Free 1040x forms prepared online Owner-user. Free 1040x forms prepared online   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. Free 1040x forms prepared online Examples of property that functions in the same way as the property it replaces are a home that replaces another home, a dairy cow that replaces another dairy cow, and farm land that replaces other farm land. Free 1040x forms prepared online A grinding mill that replaces a tractor does not qualify. Free 1040x forms prepared online Neither does a breeding or draft animal that replaces a dairy cow. Free 1040x forms prepared online Soil or other environmental contamination. Free 1040x forms prepared online   If, because of soil or other environmental contamination, it is not feasible for you to reinvest your insurance money or other proceeds from destroyed or damaged livestock in property similar or related in service or use to the livestock, you can treat other property (including real property) used for farming purposes, as property similar or related in service or use to the destroyed or damaged livestock. Free 1040x forms prepared online Weather-related conditions. Free 1040x forms prepared online   If, because of drought, flood, or other weather-related conditions, it is not feasible for you to reinvest the insurance money or other proceeds in property similar or related in service or use to the livestock, you can treat other property (excluding real property) used for farming purposes, as property similar or related in service or use to the livestock you disposed of. Free 1040x forms prepared online Example. Free 1040x forms prepared online Each year you normally sell 25 cows from your beef herd. Free 1040x forms prepared online However, this year you had to sell 50 cows. Free 1040x forms prepared online This is because a severe drought significantly reduced the amount of hay and pasture yield needed to feed your herd for the rest of the year. Free 1040x forms prepared online Because, as a result of the severe drought, it is not feasible for you to use the proceeds from selling the extra cows to buy new cows, you can treat other property (excluding real property) used for farming purposes, as property similar or related in service or use to the cows you sold. Free 1040x forms prepared online Standing crop destroyed by casualty. Free 1040x forms prepared online   If a storm or other casualty destroyed your standing crop and you use the insurance money to acquire either another standing crop or a harvested crop, this purchase qualifies as replacement property. Free 1040x forms prepared online The costs of planting and raising a new crop qualify as replacement costs for the destroyed crop only if you use the crop method of accounting (discussed in chapter 2). Free 1040x forms prepared online In that case, the costs of bringing the new crop to the same level of maturity as the destroyed crop qualify as replacement costs to the extent they are incurred during the replacement period. Free 1040x forms prepared online Timber loss. Free 1040x forms prepared online   Standing timber you bought with the proceeds from the sale of timber downed as a result of a casualty, such as high winds, earthquakes, or volcanic eruptions, qualifies as replacement property. Free 1040x forms prepared online If you bought the standing timber within the replacement period, you can postpone reporting the gain. Free 1040x forms prepared online Business or income-producing property located in a federally declared disaster area. Free 1040x forms prepared online   If your destroyed business or income-producing property was located in a federally declared disaster area, any tangible replacement property you acquire for use in any business is treated as similar or related in service or use to the destroyed property. Free 1040x forms prepared online For more information, see Disaster Area Losses in Publication 547. Free 1040x forms prepared online Substituting replacement property. Free 1040x forms prepared online   Once you have acquired qualified replacement property that you designate as replacement property in a statement attached to your tax return, you cannot substitute other qualified replacement property. Free 1040x forms prepared online This is true even if you acquire the other property within the replacement period. Free 1040x forms prepared online However, if you discover that the original replacement property was not qualified replacement property, you can, within the replacement period, substitute the new qualified replacement property. Free 1040x forms prepared online Basis of replacement property. Free 1040x forms prepared online   You must reduce the basis of your replacement property (its cost) by the amount of postponed gain. Free 1040x forms prepared online In this way, tax on the gain is postponed until you dispose of the replacement property. Free 1040x forms prepared online Replacement Period To postpone reporting your gain, you must buy replacement property within a specified period of time. Free 1040x forms prepared online This is the replacement period. Free 1040x forms prepared online The replacement period begins on the date your property was damaged, destroyed, stolen, sold, or exchanged. Free 1040x forms prepared online The replacement period generally ends 2 years after the close of the first tax year in which you realize any part of your gain from the involuntary conversion. Free 1040x forms prepared online Example. Free 1040x forms prepared online You are a calendar year taxpayer. Free 1040x forms prepared online While you were on vacation, farm equipment that cost $2,200 was stolen from your farm. Free 1040x forms prepared online You discovered the theft when you returned to your farm on November 11, 2012. Free 1040x forms prepared online Your insurance company investigated the theft and did not settle your claim until January 5, 2013, when they paid you $3,000. Free 1040x forms prepared online You first realized a gain from the reimbursement for the theft during 2013, so you have until December 31, 2015, to replace the property. Free 1040x forms prepared online Main home in disaster area. Free 1040x forms prepared online   For your main home (or its contents) located in a federally declared disaster area, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the involuntary conversion. Free 1040x forms prepared online See Disaster Area Losses , later. Free 1040x forms prepared online Property in the Midwestern disaster areas. Free 1040x forms prepared online   For property located in the Midwestern disaster areas (defined in Table 4 in the 2008 Publication 547) that was destroyed, damaged, stolen, or condemned, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Free 1040x forms prepared online This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Midwestern disaster areas. Free 1040x forms prepared online Property in the Kansas disaster area. Free 1040x forms prepared online   For property located in the Kansas disaster area that was destroyed, damaged, stolen, or condemned after May 3, 2007, as a result of the Kansas storms and tornadoes, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Free 1040x forms prepared online This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Kansas disaster area. Free 1040x forms prepared online Property in the Hurricane Katrina disaster area. Free 1040x forms prepared online   For property located in the Hurricane Katrina disaster area that was destroyed, damaged, stolen, or condemned after August 24, 2005, as a result of Hurricane Katrina, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Free 1040x forms prepared online This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Free 1040x forms prepared online Weather-related sales of livestock in an area eligible for federal assistance. Free 1040x forms prepared online   For the sale or exchange of livestock due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. Free 1040x forms prepared online The IRS may extend the replacement period on a regional basis if the weather-related conditions continue for longer than 3 years. Free 1040x forms prepared online   For information on extensions of the replacement period because of persistent drought, see Notice 2006-82, 2006-39 I. Free 1040x forms prepared online R. Free 1040x forms prepared online B. Free 1040x forms prepared online 529, available at  www. Free 1040x forms prepared online irs. Free 1040x forms prepared online gov/irb/2006-39_IRB/ar11. Free 1040x forms prepared online html. Free 1040x forms prepared online For a list of counties for which exceptional, extreme, or severe drought was reported during the 12 months ending August 31, 2013, see Notice 2013-62, available at IRS. Free 1040x forms prepared online gov. Free 1040x forms prepared online Condemnation. Free 1040x forms prepared online   The replacement period for a condemnation begins on the earlier of the following dates. Free 1040x forms prepared online The date on which you disposed of the condemned property. Free 1040x forms prepared online The date on which the threat of condemnation began. Free 1040x forms prepared online The replacement period generally ends 2 years after the close of the first tax year in which any part of the gain on the condemnation is realized. Free 1040x forms prepared online But see Main home in disaster area , Property in the Midwestern disaster areas , Property in the Kansas disaster area , and Property in the Hurricane Katrina disaster area , earlier, for exceptions. Free 1040x forms prepared online Business or investment real property. Free 1040x forms prepared online   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the close of the first tax year in which any part of the gain on the condemnation is realized. Free 1040x forms prepared online Extension. Free 1040x forms prepared online   You can apply for an extension of the replacement period. Free 1040x forms prepared online Send your written application to the Internal Revenue Service Center where you file your tax return. Free 1040x forms prepared online See your tax return instructions for the address. Free 1040x forms prepared online Include all the details about your need for an extension. Free 1040x forms prepared online Make your application before the end of the replacement period. Free 1040x forms prepared online However, you can file an application within a reasonable time after the replacement period ends if you can show a good reason for the delay. Free 1040x forms prepared online You will get an extension of the replacement period if you can show reasonable cause for not making the replacement within the regular period. Free 1040x forms prepared online How To Postpone Gain You postpone reporting your gain by reporting your choice on your tax return for the year you have the gain. Free 1040x forms prepared online You have the gain in the year you receive insurance proceeds or other reimbursements that result in a gain. Free 1040x forms prepared online Required statement. Free 1040x forms prepared online   You should attach a statement to your return for the year you have the gain. Free 1040x forms prepared online This statement should include all the following information. Free 1040x forms prepared online The date and details of the casualty, theft, or other involuntary conversion. Free 1040x forms prepared online The insurance or other reimbursement you received. Free 1040x forms prepared online How you figured the gain. Free 1040x forms prepared online Replacement property acquired before return filed. Free 1040x forms prepared online   If you acquire replacement property before you file your return for the year you have the gain, your statement should also include detailed information about all the following items. Free 1040x forms prepared online The replacement property. Free 1040x forms prepared online The postponed gain. Free 1040x forms prepared online The basis adjustment that reflects the postponed gain. Free 1040x forms prepared online Any gain you are reporting as income. Free 1040x forms prepared online Replacement property acquired after return filed. Free 1040x forms prepared online   If you intend to buy replacement property after you file your return for the year you realize gain, your statement should also say that you are choosing to replace the property within the required replacement period. Free 1040x forms prepared online   You should then attach another statement to your return for the year in which you buy the replacement property. Free 1040x forms prepared online This statement should contain detailed information on the replacement property. Free 1040x forms prepared online If you acquire part of your replacement property in one year and part in another year, you must attach a statement to each year's return. Free 1040x forms prepared online Include in the statement detailed information on the replacement property bought in that year. Free 1040x forms prepared online Reporting weather-related sales of livestock. Free 1040x forms prepared online   If you choose to postpone reporting the gain on weather-related sales or exchanges of livestock, show all the following information on a statement attached to your return for the tax year in which you first realize any of the gain. Free 1040x forms prepared online Evidence of the weather-related conditions that forced the sale or exchange of the livestock. Free 1040x forms prepared online The gain realized on the sale or exchange. Free 1040x forms prepared online The number and kind of livestock sold or exchanged. Free 1040x forms prepared online The number of livestock of each kind you would have sold or exchanged under your usual business practice. Free 1040x forms prepared online   Show all the following information and the preceding information on the return for the year in which you replace the livestock. Free 1040x forms prepared online The dates you bought the replacement property. Free 1040x forms prepared online The cost of the replacement property. Free 1040x forms prepared online Description of the replacement property (for example, the number and kind of the replacement livestock). Free 1040x forms prepared online Amended return. Free 1040x forms prepared online   You must file an amended return (Form 1040X) for the tax year of the gain in either of the following situations. Free 1040x forms prepared online You do not acquire replacement property within the replacement period, plus extensions. Free 1040x forms prepared online On this amended return, you must report the gain and pay any additional tax due. Free 1040x forms prepared online You acquire replacement property within the required replacement period, plus extensions, but at a cost less than the amount you receive from the casualty, theft, or other involuntary conversion. Free 1040x forms prepared online On this amended return, you must report the part of the gain that cannot be postponed and pay any additional tax due. Free 1040x forms prepared online Disaster Area Losses Special rules apply to federally declared disaster area losses. Free 1040x forms prepared online A federally declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Robert T. Free 1040x forms prepared online Stafford Disaster Relief and Emergency Assistance Act. Free 1040x forms prepared online It includes a major disaster or emergency declaration under the act. Free 1040x forms prepared online A list of the areas warranting public or individual assistance (or both) under the Act is available at the Federal Emergency Management Agency (FEMA) web site at www. Free 1040x forms prepared online fema. Free 1040x forms prepared online gov. Free 1040x forms prepared online This part discusses the special rules for when to deduct a disaster area loss and what tax deadlines may be postponed. Free 1040x forms prepared online For other special rules, see Disaster Area Losses in Publication 547. Free 1040x forms prepared online When to deduct the loss. Free 1040x forms prepared online   You generally must deduct a casualty loss in the year it occurred. Free 1040x forms prepared online However, if you have a deductible loss from a disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct that loss on your return or amended return for the tax year immediately preceding the tax year in which the disaster happened. Free 1040x forms prepared online If you make this choice, the loss is treated as having occurred in the preceding year. Free 1040x forms prepared online    Claiming a qualifying disaster loss on the previous year's return may result in a lower tax for that year, often producing or increasing a cash refund. Free 1040x forms prepared online   You must make the choice to take your casualty loss for the disaster in the preceding year by the later of the following dates. Free 1040x forms prepared online The due date (without extensions) for filing your tax return for the tax year in which the disaster actually occurred. Free 1040x forms prepared online The due date (with extensions) for the return for the preceding tax year. Free 1040x forms prepared online Federal disaster relief grants. Free 1040x forms prepared online   Do not include post-disaster relief grants received under the Robert T. Free 1040x forms prepared online Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, or funeral expenses. Free 1040x forms prepared online Do not deduct casualty losses or medical expenses to the extent they are specifically reimbursed by these disaster relief grants. Free 1040x forms prepared online If the casualty loss was specifically reimbursed by the grant and you received the grant after the year in which you deducted the casualty loss, see Reimbursement received after deducting loss , earlier. Free 1040x forms prepared online Unemployment assistance payments under the Act are taxable unemployment compensation. Free 1040x forms prepared online Qualified disaster relief payments. Free 1040x forms prepared online   Qualified disaster relief payments are not included in the income of individuals to the extent any expenses compensated by these payments are not otherwise compensated for by insurance or other reimbursement. Free 1040x forms prepared online These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Free 1040x forms prepared online No withholding applies to these payments. Free 1040x forms prepared online   Qualified disaster relief payments include payments you receive (regardless of the source) for the following expenses. Free 1040x forms prepared online Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a federally declared disaster. Free 1040x forms prepared online Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a federally declared disaster. Free 1040x forms prepared online (A personal residence can be a rented residence or one you own. Free 1040x forms prepared online ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a federally declared disaster. Free 1040x forms prepared online   Qualified disaster relief payments include amounts paid by a federal, state, or local government in connection with a federally declared disaster to individuals affected by the disaster. Free 1040x forms prepared online    Qualified disaster relief payments do not include: Payments for expenses otherwise paid for by insurance or other reimbursements, or Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation. Free 1040x forms prepared online Qualified disaster mitigation payments. Free 1040x forms prepared online   Qualified disaster mitigation payments made under the Robert T. Free 1040x forms prepared online Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not included in income. Free 1040x forms prepared online These are payments you, as a property owner, receive to reduce the risk of future damage to your property. Free 1040x forms prepared online You cannot increase your basis in property, or take a deduction or credit, for expenditures made with respect to those payments. Free 1040x forms prepared online Sale of property under hazard mitigation program. Free 1040x forms prepared online   Generally, if you sell or otherwise transfer property, you must recognize any gain or loss for tax purposes unless the property is your main home. Free 1040x forms prepared online You report the gain or deduct the loss on your tax return for the year you realize it. Free 1040x forms prepared online (You cannot deduct a loss on personal-use property unless the loss resulted from a casualty, as discussed earlier. Free 1040x forms prepared online ) However, if you sell or otherwise transfer property to the Federal Government, a state or local government, or an Indian tribal government under a hazard mitigation program, you can choose to postpone reporting the gain if you buy qualifying replacement property within a certain period of time. Free 1040x forms prepared online See Postponing Gain , earlier, for the rules that apply. Free 1040x forms prepared online Other federal assistance programs. Free 1040x forms prepared online    For more information about other federal assistance programs, see Crop Insurance and Crop Disaster Payments and Feed Assistance and Payments in chapter 3 earlier. Free 1040x forms prepared online Postponed tax deadlines. Free 1040x forms prepared online   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. Free 1040x forms prepared online The tax deadlines the IRS may postpone include those for filing income, excise, and employment tax returns, paying income, excise, and employment taxes, and making contributions to a traditional IRA or Roth IRA. Free 1040x forms prepared online   If any tax deadline is postponed, the IRS will publicize the postponement in your area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Free 1040x forms prepared online Go to http://www. Free 1040x forms prepared online irs. Free 1040x forms prepared online gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. Free 1040x forms prepared online Who is eligible. Free 1040x forms prepared online   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Free 1040x forms prepared online Any individual whose main home is located in a covered disaster area (defined next). Free 1040x forms prepared online Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. Free 1040x forms prepared online Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered disaster area. Free 1040x forms prepared online Any individual, business entity, or sole proprietorship whose records are needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. Free 1040x forms prepared online The main home or principal place of business does not have to be located in the covered disaster area. Free 1040x forms prepared online Any estate or trust that has tax records necessary to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. Free 1040x forms prepared online The spouse on a joint return with a taxpayer who is eligible for postponements. Free 1040x forms prepared online Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose necessary records to meet a postponed tax deadline are located in the covered disaster area. Free 1040x forms prepared online Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. Free 1040x forms prepared online Any other person determined by the IRS to be affected by a federally declared disaster. Free 1040x forms prepared online Covered disaster area. Free 1040x forms prepared online   This is an area of a federally declared disaster area in which the IRS has decided to postpone tax deadlines for up to 1 year. Free 1040x forms prepared online Abatement of interest and penalties. Free 1040x forms prepared online   The IRS may abate the interest and penalties on the underpaid income tax for the length of any postponement of tax deadlines. Free 1040x forms prepared online Reporting Gains and Losses You will have to file one or more of the following forms to report your gains or losses from involuntary conversions. Free 1040x forms prepared online Form 4684. Free 1040x forms prepared online   Use this form to report your gains and losses from casualties and thefts. Free 1040x forms prepared online Form 4797. Free 1040x forms prepared online   Use this form to report involuntary conversions (other than from casualty or theft) of property used in your trade or business and capital assets held in connection with a trade or business or a transaction entered into for profit. Free 1040x forms prepared online Also use this form if you have a gain from a casualty or theft on trade, business or income-producing property held for more than 1 year and you have to recapture some or all of your gain as ordinary income. Free 1040x forms prepared online Form 8949. Free 1040x forms prepared online   Use this form to report gain from an involuntary conversion (other than from casualty or theft) of personal-use property. Free 1040x forms prepared online Schedule A (Form 1040). Free 1040x forms prepared online   Use this form to deduct your losses from casualties and thefts of personal-use property and income-producing property, that you reported on Form 4684. Free 1040x forms prepared online Schedule D (Form 1040). Free 1040x forms prepared online   Use this form to carry over the following gains. Free 1040x forms prepared online Net gain shown on Form 4797 from an involuntary conversion of business property held for more than 1 year. Free 1040x forms prepared online Net gain shown on Form 4684 from the casualty or theft of personal-use property. Free 1040x forms prepared online    Also use this form to figure the overall gain or loss from transactions reported on Form 8949. Free 1040x forms prepared online Schedule F (Form 1040). Free 1040x forms prepared online   Use this form to deduct your losses from casualty or theft of livestock or produce bought for sale under Other expenses in Part II, line 32, if you use the cash method of accounting and have not otherwise deducted these losses. Free 1040x forms prepared online Prev  Up  Next   Home   More Online Publications