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Need To Amend Tax Return

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Need To Amend Tax Return

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

Need to amend tax return Publication 901 - Introductory Material Table of Contents Future Developments Reminders IntroductionOrdering forms and publications. Need to amend tax return Tax questions. Need to amend tax return Obtaining copies of treaties. Need to amend tax return Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 901, such as treaties effective after it was published, go to www. Need to amend tax return irs. Need to amend tax return gov/pub901. Need to amend tax return Reminders Disclosure of a treaty-based position that reduces your tax. Need to amend tax return  If you take the position that any U. Need to amend tax return S. Need to amend tax return tax is overruled or otherwise reduced by a U. Need to amend tax return S. Need to amend tax return treaty (a treaty-based position), you generally must disclose that position on your affected return. Need to amend tax return See Application of Treaties, later. Need to amend tax return U. Need to amend tax return S. Need to amend tax return –U. Need to amend tax return S. Need to amend tax return S. Need to amend tax return R. Need to amend tax return income tax treaty. Need to amend tax return  The U. Need to amend tax return S. Need to amend tax return –U. Need to amend tax return S. Need to amend tax return S. Need to amend tax return R. Need to amend tax return income tax treaty remains in effect for the following members of the Commonwealth of Independent States: Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan. Need to amend tax return That treaty will remain in effect until new treaties with these individual countries are negotiated and ratified. Need to amend tax return Provisions of the U. Need to amend tax return S. Need to amend tax return –U. Need to amend tax return S. Need to amend tax return S. Need to amend tax return R. Need to amend tax return income tax treaty are discussed in this publication under Commonwealth of Independent States. Need to amend tax return U. Need to amend tax return S. Need to amend tax return –China income tax treaty. Need to amend tax return  The U. Need to amend tax return S. Need to amend tax return –China income tax treaty does not apply to Hong Kong. Need to amend tax return Introduction This publication will tell you whether a tax treaty between the United States and a particular country offers a reduced rate of, or possibly a complete exemption from, U. Need to amend tax return S. Need to amend tax return income tax for residents of that particular country. Need to amend tax return Tables in the back of this publication show the countries that have income tax treaties with the United States, the tax rates on different kinds of income, and the kinds of income that are exempt from tax. Need to amend tax return You should use this publication only for quick reference. Need to amend tax return It is not a complete guide to all provisions of every income tax treaty. Need to amend tax return Comments and suggestions. Need to amend tax return   We welcome your comments about this publication and your suggestions for future editions. Need to amend tax return   You can write to us at the following address: Internal Revenue Service Business Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. Need to amend tax return NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Need to amend tax return Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Need to amend tax return   You can email us at taxforms@irs. Need to amend tax return gov. Need to amend tax return Please put “Publications Comment” on the subject line. Need to amend tax return You can also send us comments from www. Need to amend tax return irs. Need to amend tax return gov/formspubs. Need to amend tax return Select “Comment on Tax Forms and Publications” under “Information About. Need to amend tax return ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Need to amend tax return Ordering forms and publications. Need to amend tax return   Visit www. Need to amend tax return irs. Need to amend tax return gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. Need to amend tax return Internal Revenue Service 1201 N. Need to amend tax return Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Need to amend tax return   If you have a tax question, check the information available on IRS. Need to amend tax return gov or call 1-800-829-1040. Need to amend tax return We cannot answer tax questions sent to either of the above addresses. Need to amend tax return Obtaining copies of treaties. Need to amend tax return   You can get complete information about treaty provisions from the taxing authority in the country from which you receive income or from the treaty itself. Need to amend tax return   You can obtain the text of most of the treaties at www. Need to amend tax return irs. Need to amend tax return gov/businesses/international. Need to amend tax return You can also obtain the text of most of the treaties at the following address: Department of the Treasury Office of Public Correspondence 1500 Pennsylvania Ave. Need to amend tax return NW — Rm. Need to amend tax return 3419 Washington, D. Need to amend tax return C. Need to amend tax return 20220 If you have specific questions about a treaty, you can get this information from most Internal Revenue Service offices or from: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Useful Items - You may want to see: Publication 519 U. Need to amend tax return S. Need to amend tax return Tax Guide for Aliens 597 Information on the United States–Canada Income Tax Treaty Form (and Instructions) 8833 Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b) See How To Get Tax Help near the end of this publication for information about getting these publications and forms. Need to amend tax return Prev  Up  Next   Home   More Online Publications