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2011 Tax Booklet

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2011 Tax Booklet

2011 tax booklet 4. 2011 tax booklet   Filing U. 2011 tax booklet S. 2011 tax booklet Tax Returns Table of Contents Who Must FileFiling Requirement if Possession Income Is Excluded When To FileExtension of Time To File Where To File Special Rules for Completing Your U. 2011 tax booklet S. 2011 tax booklet Tax ReturnU. 2011 tax booklet S. 2011 tax booklet Armed Forces. 2011 tax booklet Deductions if Possession Income Is Excluded Foreign Tax Credit if Possession Income Is Excluded Self-Employment Tax Additional Medicare Tax Net Investment Income Tax Paying Your TaxesEstimated Tax Double TaxationCompetent Authority Assistance The information in chapter 3 will tell you if a U. 2011 tax booklet S. 2011 tax booklet income tax return is required for your situation. 2011 tax booklet If a U. 2011 tax booklet S. 2011 tax booklet return is required, your next step is to see if you meet the filing requirements. 2011 tax booklet If you do meet the filing requirements, the information presented in this chapter will help you understand the special procedures involved. 2011 tax booklet This chapter discusses: Filing requirements, When to file your return, Where to send your return, How to adjust your deductions and credits if you are excluding income from American Samoa or Puerto Rico, How to make estimated tax payments and pay self-employment tax, and How to request assistance in resolving instances of double taxation. 2011 tax booklet Who Must File If you are not required to file a possession tax return that includes your worldwide income, you must generally file a U. 2011 tax booklet S. 2011 tax booklet income tax return if your gross income is at least the amount shown in Table 4-1, later, for your filing status and age. 2011 tax booklet If you were a bona fide resident of American Samoa or Puerto Rico and are able to exclude your possession income from your U. 2011 tax booklet S. 2011 tax booklet tax return, your filing requirement may be less than the amount in Table 4-1. 2011 tax booklet For details, see the information under Filing Requirement if Possession Income Is Excluded , later. 2011 tax booklet Some individuals (such as those who can be claimed as a dependent on another person's return or who owe certain taxes, such as self-employment tax) must file a tax return even though the gross income is less than the amount shown in Table 4-1 for their filing status and age. 2011 tax booklet For more information, see the Form 1040 instructions. 2011 tax booklet Filing Requirement if Possession Income Is Excluded If you were a bona fide resident of American Samoa or Puerto Rico and qualify to exclude possession income on your U. 2011 tax booklet S. 2011 tax booklet tax return, you must determine your adjusted filing requirement. 2011 tax booklet Generally, your filing requirement is based on the total of your (and your spouse's if filing a joint return) personal exemption(s) plus your standard deduction. 2011 tax booklet Personal exemption. 2011 tax booklet   When figuring your filing requirement, your personal exemption is allowed in full. 2011 tax booklet Do not reduce it for this purpose. 2011 tax booklet Do not include exemptions for your dependents. 2011 tax booklet Allowable standard deduction. 2011 tax booklet   Unless your filing status is married filing separately, the minimum income level at which you must file a return is based, in part, on the standard deduction for your filing status and age. 2011 tax booklet Because the standard deduction applies to all types of income, it must be divided between your excluded income and income from other sources. 2011 tax booklet Multiply the regular standard deduction for your filing status and age (this is zero if you are married filing a separate return; all others, see Form 1040 instructions) by the following fraction:      Gross income subject to U. 2011 tax booklet S. 2011 tax booklet income tax     Gross income from all sources (including excluded possession income)   Example. 2011 tax booklet Barbara Spruce, a U. 2011 tax booklet S. 2011 tax booklet citizen, is single, under 65, and a bona fide resident of American Samoa. 2011 tax booklet During 2013, she received $20,000 of income from American Samoa sources (qualifies for exclusion) and $8,000 of income from sources outside the possession (subject to U. 2011 tax booklet S. 2011 tax booklet income tax). 2011 tax booklet Her allowable standard deduction for 2013 is figured as follows:   $8,000 $28,000 × $6,100 (regular standard deduction) = $1,743   Adjusted filing requirement. 2011 tax booklet   Figure your adjusted filing requirement by adding the amount of your allowable standard deduction to the amount of your personal exemption. 2011 tax booklet You must file a U. 2011 tax booklet S. 2011 tax booklet income tax return if your gross income is at least the amount shown on line 3 of the following worksheet. 2011 tax booklet    1. 2011 tax booklet Enter the allowable standard deduction you figured earlier under Allowable standard deduction . 2011 tax booklet If your filing status is married filing separately, enter -0-   2. 2011 tax booklet Personal exemption. 2011 tax booklet If your filing status is married filing jointly, enter $7,800; if someone can claim you as a dependent, enter -0-; otherwise, enter $3,900   3. 2011 tax booklet Add lines 1 and 2. 2011 tax booklet You must file a U. 2011 tax booklet S. 2011 tax booklet income tax return if your gross income from sources outside the relevant possession is at least this amount   Table 4-1. 2011 tax booklet 2013 Filing Requirements Chart for Most Taxpayers IF your filing status is. 2011 tax booklet . 2011 tax booklet . 2011 tax booklet AND at the end of 2013 you were*. 2011 tax booklet . 2011 tax booklet . 2011 tax booklet THEN file a return if your gross income** was at least. 2011 tax booklet . 2011 tax booklet . 2011 tax booklet single under 65 $10,000 65 or older $11,500 married filing jointly*** under 65 (both spouses) $20,000 65 or older (one spouse) $21,200 65 or older (both spouses) $22,400 married filing separately any age $3,900 head of household under 65 $12,850 65 or older $14,350 qualifying widow(er)  with dependent child under 65 $16,100 65 or older $17,300 * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. 2011 tax booklet ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States (even if you can exclude part or all of it). 2011 tax booklet Do not include social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time during 2013, or (b) one-half of your social security benefits plus your other gross income is more than $25,000 ($32,000 if married filing jointly). 2011 tax booklet If (a) or (b) applies, see the instructions for Form 1040 or Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure the taxable part of social security benefits you must include in gross income. 2011 tax booklet *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900 you must file a return regardless of your age. 2011 tax booklet Example 1. 2011 tax booklet James and Joan Thompson, one over 65, are U. 2011 tax booklet S. 2011 tax booklet citizens and bona fide residents of Puerto Rico during the entire tax year. 2011 tax booklet They file a joint income tax return. 2011 tax booklet During 2013, they received $35,000 of income from Puerto Rico sources (qualifies for exclusion) and $6,000 of income from sources outside Puerto Rico (subject to U. 2011 tax booklet S. 2011 tax booklet income tax). 2011 tax booklet Their allowable standard deduction for 2013 is figured as follows:   $6,000 $41,000 × $13,400 ( standard deduction for 65 or older (one spouse) ) = $1,961   The Thompsons do not have to file a U. 2011 tax booklet S. 2011 tax booklet income tax return because their gross income subject to U. 2011 tax booklet S. 2011 tax booklet tax ($6,000) is less than their allowable standard deduction plus their personal exemptions ($1,961+ $7,800= $9,761). 2011 tax booklet Example 2. 2011 tax booklet Barbara Spruce (see Example under Allowable standard deduction, earlier), however, must file a U. 2011 tax booklet S. 2011 tax booklet income tax return because her gross income subject to U. 2011 tax booklet S. 2011 tax booklet tax ($8,000) is more than her allowable standard deduction plus her personal exemption ($1,743 + $3,900 = $5,643). 2011 tax booklet If you must file a U. 2011 tax booklet S. 2011 tax booklet income tax return, you may be able to file a paperless return using IRS e-file. 2011 tax booklet See your form instructions or visit our website at IRS. 2011 tax booklet gov. 2011 tax booklet When To File If you file on a calendar year basis, the due date for filing your U. 2011 tax booklet S. 2011 tax booklet income tax return is April 15 following the end of your tax year. 2011 tax booklet If you use a fiscal year (a year ending on the last day of a month other than December), the due date is the 15th day of the 4th month after the end of your fiscal year. 2011 tax booklet If any due date falls on a Saturday, Sunday, or legal holiday, your tax return is due on the next business day. 2011 tax booklet For your 2013 tax return, the due date is April 15, 2014. 2011 tax booklet If you mail your federal tax return, it is considered timely if it bears an official postmark dated on or before the due date, including any extensions. 2011 tax booklet If you use a private delivery service designated by the IRS, generally the postmark date is the date the private delivery service records in its database or marks on the mailing label. 2011 tax booklet See your form instructions for a list of designated private delivery services. 2011 tax booklet Extension of Time To File You can get an extension of time to file your U. 2011 tax booklet S. 2011 tax booklet income tax return. 2011 tax booklet Special rules apply for those living outside the United States. 2011 tax booklet Automatic 6-Month Extension If you cannot file your 2013 return by the due date, you can get an automatic 6-month extension of time to file. 2011 tax booklet Example. 2011 tax booklet If your return must be filed by April 15, 2014, you will have until October 15, 2014, to file. 2011 tax booklet Although you are not required to make a payment of the tax you estimate as due, Form 4868 does not extend the time to pay taxes. 2011 tax booklet If you do not pay the amount due by the regular due date (generally April 15), you will owe interest on any unpaid tax from the original due date to the date you pay the tax. 2011 tax booklet You may also be charged penalties (see the Instructions for Form 4868). 2011 tax booklet How to get the automatic extension. 2011 tax booklet   You can get the automatic 6-month extension if you do one of the following by the due date for filing your return. 2011 tax booklet E-file Form 4868 using your personal computer or a tax professional. 2011 tax booklet E-file and pay by credit or debit card. 2011 tax booklet Your payment must be at least $1. 2011 tax booklet You may pay by phone or over the Internet. 2011 tax booklet Do not file Form 4868. 2011 tax booklet File a paper Form 4868. 2011 tax booklet If you are a fiscal year taxpayer, you must file a paper Form 4868. 2011 tax booklet See Form 4868 for information on getting an extension using these options. 2011 tax booklet When to file. 2011 tax booklet   You must request the automatic extension by the due date for your return. 2011 tax booklet You can file your return any time before the 6-month extension period ends. 2011 tax booklet When you file your return. 2011 tax booklet   Enter any payment you made related to the extension of time to file on Form 1040, line 68. 2011 tax booklet If you file Form 1040A, U. 2011 tax booklet S. 2011 tax booklet Individual Income Tax Return, or Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, include that payment in your total payments on Form 1040A, line 41, or Form 1040EZ, line 9. 2011 tax booklet Also enter “Form 4868” and the amount paid in the space to the left of the entry space for line 41 or line 9. 2011 tax booklet You cannot ask the Internal Revenue Service to figure your tax if you use the extension of time to file. 2011 tax booklet Individuals Outside the United States and Puerto Rico You are allowed an automatic 2-month extension (until June 16, 2014, if you use the calendar year) to file your 2013 return and pay any federal income tax due if: You are a U. 2011 tax booklet S. 2011 tax booklet citizen or resident, and On the due date of your return: You are living outside of the United States and Puerto Rico, and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and Puerto Rico. 2011 tax booklet However, if you pay the tax due after the regular due date (generally April 15), interest will be charged from April 15 until the date the tax is paid. 2011 tax booklet If you serve in a combat zone or qualified hazardous duty area, you may be eligible for a longer extension of time to file. 2011 tax booklet For more information, see Publication 3, Armed Forces' Tax Guide. 2011 tax booklet Married taxpayers. 2011 tax booklet   If you file a joint return, only one spouse has to qualify for this automatic extension. 2011 tax booklet However, if you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies. 2011 tax booklet How to get the extension. 2011 tax booklet   To use this special automatic extension, you must attach a statement to your return explaining what situation qualified you for the extension. 2011 tax booklet (See the situations listed under (2), earlier. 2011 tax booklet ) Extension beyond 2 months. 2011 tax booklet   If you cannot file your 2013 return within the automatic 2-month extension period, you can get an additional 4-month extension, for a total of 6 months. 2011 tax booklet File Form 4868 by the end of the automatic extension period (June 16, 2014 for calendar year taxpayers). 2011 tax booklet Be sure to check the box on Form 4868, line 8, if appropriate. 2011 tax booklet   In addition to this 6-month extension, taxpayers who are out of the country (as defined under (2) earlier) can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). 2011 tax booklet   To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. 2011 tax booklet Send the letter by the extended due date (October 15 for calendar year taxpayers) to:  Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   You will not receive any notification from the IRS unless your request is denied for being untimely. 2011 tax booklet Where To File Use the addresses listed below if you have to file Form 1040 with the United States and you are excluding possession income from American Samoa or Puerto Rico. 2011 tax booklet If you are not including a check or a money order, send your U. 2011 tax booklet S. 2011 tax booklet tax return and all attachments to:   Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA If you are including a check or a money order, send your U. 2011 tax booklet S. 2011 tax booklet tax return and all attachments to:  Internal Revenue Service P. 2011 tax booklet O. 2011 tax booklet Box 1303 Charlotte, NC 28201-1303 USA Also send your U. 2011 tax booklet S. 2011 tax booklet return to these addresses if you are attaching Form 5074 or Form 8689. 2011 tax booklet If you are not in either of the above categories, send your return to the address shown in the Form 1040 instructions for the possession or state in which you reside. 2011 tax booklet Special Rules for Completing Your U. 2011 tax booklet S. 2011 tax booklet Tax Return If you are not excluding possession income from your U. 2011 tax booklet S. 2011 tax booklet tax return, follow the instructions for the specific forms you file. 2011 tax booklet However, you may not qualify to claim the earned income credit (EIC). 2011 tax booklet Earned income credit. 2011 tax booklet   Even if you maintain a household in one of the possessions discussed in this publication that is your main home and the home of your qualifying child, you cannot claim the earned income credit on your U. 2011 tax booklet S. 2011 tax booklet tax return. 2011 tax booklet This credit is available only if you maintain the household in the United States or you are serving on extended active duty in the U. 2011 tax booklet S. 2011 tax booklet Armed Forces. 2011 tax booklet U. 2011 tax booklet S. 2011 tax booklet Armed Forces. 2011 tax booklet   U. 2011 tax booklet S. 2011 tax booklet military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. 2011 tax booklet Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. 2011 tax booklet Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. 2011 tax booklet Income from American Samoa or Puerto Rico excluded. 2011 tax booklet   You will not be allowed to take deductions and credits that apply to the excluded income. 2011 tax booklet The additional information you need follows. 2011 tax booklet Deductions if Possession Income Is Excluded Deductions that specifically apply to your excluded possession income, such as employee business expenses, are not allowable on your U. 2011 tax booklet S. 2011 tax booklet income tax return. 2011 tax booklet Deductions that do not specifically apply to any particular type of income must be divided between your excluded income from sources in the relevant possession and income from all other sources to find the part that you can deduct on your U. 2011 tax booklet S. 2011 tax booklet tax return. 2011 tax booklet Examples of such deductions are alimony payments, the standard deduction, and certain itemized deductions (such as medical expenses, charitable contributions, real estate taxes, and mortgage interest on your home). 2011 tax booklet Figuring the deduction. 2011 tax booklet   To find the part of a deduction that is allowable, multiply the deduction by the following fraction. 2011 tax booklet   Gross income subject to U. 2011 tax booklet S. 2011 tax booklet income tax     Gross income from all sources (including excluded possession income)   Adjustments to Income Your adjusted gross income equals your gross income minus certain deductions (adjustments). 2011 tax booklet Moving expense deduction. 2011 tax booklet   Generally, expenses of a move to a possession are directly attributable to wages, salaries, and other earned income from that possession. 2011 tax booklet Likewise, the expenses of a move back to the United States are generally attributable to U. 2011 tax booklet S. 2011 tax booklet earned income. 2011 tax booklet   If you are claiming expenses for a move to a relevant possession, how and where you will deduct the expenses depends on your status as a bona fide resident and if any of your possession income is excluded on your U. 2011 tax booklet S. 2011 tax booklet tax return. 2011 tax booklet For more information, see Moving expense deduction in chapter 3 under the name of the relevant possession. 2011 tax booklet   If you are claiming expenses for a move from a U. 2011 tax booklet S. 2011 tax booklet possession to the United States, use Form 3903 to figure your deductible expenses and enter the amount on Form 1040, line 26. 2011 tax booklet For purposes of deducting moving expenses, the possessions are considered part of the United States. 2011 tax booklet See Publication 521, Moving Expenses, for information about what expenses are deductible. 2011 tax booklet Self-employment tax deduction. 2011 tax booklet   Generally, if you are reporting self-employment income on your U. 2011 tax booklet S. 2011 tax booklet return, you can include the deductible part of your self-employment tax on Form 1040, line 27. 2011 tax booklet This is an income tax deduction only; it is not a deduction in figuring net earnings from self-employment (for self-employment tax). 2011 tax booklet   However, if you are a bona fide resident of American Samoa or Puerto Rico and you exclude all of your self-employment income from gross income, you cannot take the deduction on Form 1040, line 27, because the deduction is related to excluded income. 2011 tax booklet   If only part of your self-employment income is excluded, the part of the deduction that is based on the nonexcluded income is allowed. 2011 tax booklet This would happen if, for instance, you have two businesses and only the income from one of them is excludable. 2011 tax booklet   For purposes of the deduction only, figure the self-employment tax on the nonexcluded income by multiplying your total self-employment tax (from Schedule SE (Form 1040)), Self-Employment Tax) by the following fraction. 2011 tax booklet   Self-employment income subject to U. 2011 tax booklet S. 2011 tax booklet income tax     Total self-employment income (including excluded possession income)   The result is your self-employment tax on nonexcluded income. 2011 tax booklet Include the deductible part of this amount on Form 1040, line 27. 2011 tax booklet Individual retirement arrangement (IRA) deduction. 2011 tax booklet   Do not take excluded income into account when figuring your deductible IRA contribution. 2011 tax booklet Standard Deduction The standard deduction is composed of the regular standard deduction amount and the additional standard deduction for taxpayers who are blind or age 65 or over. 2011 tax booklet To find the amount you can claim on Form 1040, line 40, first figure your full standard deduction according to the Instructions for Form 1040. 2011 tax booklet Then multiply your full standard deduction by the following fraction. 2011 tax booklet   Gross income subject to U. 2011 tax booklet S. 2011 tax booklet income tax     Gross income from all sources (including excluded possession income)   In the space above line 40, enter “Standard deduction modified due to income excluded under section 931 (if American Samoa) or section 933 (if Puerto Rico). 2011 tax booklet ” This calculation may not be the same as the one you used to determine if you need to file a U. 2011 tax booklet S. 2011 tax booklet tax return. 2011 tax booklet Itemized Deductions Most itemized deductions do not apply to a particular type of income. 2011 tax booklet However, itemized deductions can be divided into three categories. 2011 tax booklet Those that apply specifically to excluded income, such as employee business expenses, are not deductible. 2011 tax booklet Those that apply specifically to income subject to U. 2011 tax booklet S. 2011 tax booklet income tax, which might also be employee business expenses, are fully allowable under the Instructions for Schedule A (Form 1040), Itemized Deductions. 2011 tax booklet Those that do not apply to specific income must be allocated between your gross income subject to U. 2011 tax booklet S. 2011 tax booklet income tax and your total gross income from all sources. 2011 tax booklet The example given later shows how to figure the deductible part of each type of expense that is not related to specific income. 2011 tax booklet Example. 2011 tax booklet In 2013, you and your spouse are both under 65 and U. 2011 tax booklet S. 2011 tax booklet citizens who are bona fide residents of Puerto Rico during the entire tax year. 2011 tax booklet You file a joint income tax return. 2011 tax booklet During 2013, you earned $20,000 from Puerto Rican sources (excluded from U. 2011 tax booklet S. 2011 tax booklet gross income) and your spouse earned $60,000 from the U. 2011 tax booklet S. 2011 tax booklet Government. 2011 tax booklet You have $16,000 of itemized deductions that do not apply to any specific type of income. 2011 tax booklet These are medical expenses of $4,000, real estate taxes of $5,000, home mortgage interest of $6,000, and charitable contributions of $1,000 (cash contributions). 2011 tax booklet You determine the amount of each deduction that you can claim on your Schedule A (Form 1040), Itemized Deductions, by multiplying the deduction by the fraction shown under Figuring the deduction , earlier under Deductions if Possession Income is Excluded. 2011 tax booklet   Medical Expenses   $60,000$80,000 × $4,000 = $3,000  (enter on line 1  of Schedule A)     Real Estate Taxes   $60,000$80,000 × $5,000 = $3,750  (enter on line 6  of Schedule A)     Home Mortgage Interest   $60,000$80,000 × $6,000 = $4,500  (enter on line 10 or 11 of  Schedule A)     Charitable Contributions (cash contributions)   $60,000$80,000 × $1,000 = $750  (enter on line 16 of Schedule A)   Enter on Schedule A (Form 1040) only the allowable portion of each deduction. 2011 tax booklet Overall limitation on itemized deductions. 2011 tax booklet   If your adjusted gross income (discussed earlier) is over $300,000 if married filing jointly or qualifying widow(er); $275,000 if head of household; $250,000 if single; or $150,000 if married filing separately; see the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040), to figure your itemized deductions. 2011 tax booklet Personal Exemptions Personal exemptions are allowed in full even if excluding possession income. 2011 tax booklet However, depending upon your adjusted gross income and filing status, the amount you can deduct may be reduced. 2011 tax booklet See the Deduction for Exemptions Worksheet—Line 42 in the instructions for Form 1040. 2011 tax booklet Foreign Tax Credit if Possession Income Is Excluded If you must report American Samoa or Puerto Rico source income on your U. 2011 tax booklet S. 2011 tax booklet tax return, you can claim a foreign tax credit for income taxes paid to the possession on that income. 2011 tax booklet However, you cannot claim a foreign tax credit for taxes paid on possession income that is excluded on your U. 2011 tax booklet S. 2011 tax booklet tax return. 2011 tax booklet The foreign tax credit is generally figured on Form 1116. 2011 tax booklet If you have income, such as U. 2011 tax booklet S. 2011 tax booklet Government wages, that is not excludable, and you also have possession source income that is excludable, you must figure the credit by reducing your foreign taxes paid or accrued by the taxes based on the excluded income. 2011 tax booklet You make this reduction for each separate income category. 2011 tax booklet To find the amount of this reduction, use the following formula for each income category. 2011 tax booklet Excluded income from possession sources less deductible expenses based on that income x Tax paid or accrued to the possession = Reduction in foreign taxes Total income subject to possession tax less deductible expenses based on that income Enter the amount of the reduction on Form 1116, line 12. 2011 tax booklet For more information on the foreign tax credit, see Publication 514. 2011 tax booklet Example. 2011 tax booklet Jason and Lynn Reddy are U. 2011 tax booklet S. 2011 tax booklet citizens who were bona fide residents of Puerto Rico during all of 2013. 2011 tax booklet They file a joint tax return. 2011 tax booklet The following table shows their excludable and taxable income for U. 2011 tax booklet S. 2011 tax booklet federal income tax purposes. 2011 tax booklet   Taxable   Excludable Jason's wages from  U. 2011 tax booklet S. 2011 tax booklet Government $25,000     Lynn's wages from Puerto Rico  corp. 2011 tax booklet     $15,000 Dividend from Puerto Rico corp. 2011 tax booklet doing business in Puerto Rico     200 Dividend from U. 2011 tax booklet S. 2011 tax booklet  corp. 2011 tax booklet doing business  in U. 2011 tax booklet S. 2011 tax booklet * 1,000     Totals $26,000   $15,200 * Income from sources outside Puerto Rico is taxable. 2011 tax booklet   Jason and Lynn must file 2013 income tax returns with both Puerto Rico and the United States. 2011 tax booklet They have gross income of $26,000 for U. 2011 tax booklet S. 2011 tax booklet tax purposes. 2011 tax booklet They paid taxes to Puerto Rico of $4,000 ($3,980 on their wages and $20 on the dividend from the Puerto Rico corporation). 2011 tax booklet They figure their foreign tax credit on two Forms 1116, which they must attach to their U. 2011 tax booklet S. 2011 tax booklet return. 2011 tax booklet They fill out one Form 1116 for wages and one Form 1116 for the dividend. 2011 tax booklet Jason and Lynn figure the Puerto Rico taxes on excluded income as follows. 2011 tax booklet   Wages: ($15,000 ÷ $40,000) × $3,980 = $1,493   Dividend: ($200 ÷ $200) × $20 = $20 They enter $1,493 on Form 1116, line 12, for wages and $20 on the second Form 1116, line 12, for the dividend. 2011 tax booklet Self-Employment Tax Self-employment tax includes both social security and Medicare taxes for individuals who are self-employed. 2011 tax booklet A U. 2011 tax booklet S. 2011 tax booklet citizen or resident alien who is self-employed must pay self-employment tax on net self-employment earnings of $400 or more. 2011 tax booklet This rule applies whether or not the earnings are excludable from gross income (or whether or not a U. 2011 tax booklet S. 2011 tax booklet income tax return must otherwise be filed). 2011 tax booklet Bona fide residents of the possessions discussed in this publication are considered U. 2011 tax booklet S. 2011 tax booklet residents for this purpose and are subject to the self-employment tax. 2011 tax booklet Forms to file. 2011 tax booklet   If you have net self-employment income and are subject to self-employment tax, file one of the following with the United States. 2011 tax booklet If you are required to file Form 1040 with the United States, complete Schedule SE (Form 1040) and attach it to your Form 1040. 2011 tax booklet If you are not required to file Form 1040 with the United States and you are a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI, file Form 1040-SS. 2011 tax booklet If you are a resident of Puerto Rico, you can file the Spanish-language Form 1040-PR instead. 2011 tax booklet Do not file forms 1040-SS or 1040-PR with Form 1040. 2011 tax booklet If you are required to pay Additional Medicare Tax (discussed later) on your self-employment income, attach Form 8959, Additional Medicare Tax to Form 1040, Form 1040-SS, or Form 1040-PR, as applicable. 2011 tax booklet Chapter 11 Bankruptcy cases. 2011 tax booklet   While you are a debtor in a chapter 11 bankruptcy case, your net profit or loss from self-employment will be included on the income tax return (Form 1041, U. 2011 tax booklet S. 2011 tax booklet Income Tax Return for Estates and Trusts) of the bankruptcy estate. 2011 tax booklet However, you—not the bankruptcy estate—are responsible for paying self-employment tax on your net earnings from self-employment. 2011 tax booklet   Use Schedule SE (Form 1040), Form 1040-SS, or Form 1040-PR, as determined above, to figure your correct amount of self-employment tax. 2011 tax booklet   For other reporting requirements, see Chapter 11 Bankruptcy Cases in the Instructions for Form 1040. 2011 tax booklet Additional Medicare Tax Beginning in 2013, a 0. 2011 tax booklet 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 if single, head of household, or qualifying widow(er). 2011 tax booklet Medicare wages and self-employment income are combined to determine if income exceeds the threshold. 2011 tax booklet A self-employment loss should not be considered for purposes of this tax. 2011 tax booklet RRTA compensation should be separately compared to the threshold. 2011 tax booklet Your employer is responsible for withholding the 0. 2011 tax booklet 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000. 2011 tax booklet You should consider this withholding, if applicable, in determining whether you need to make estimated tax payments. 2011 tax booklet There are no special rules for U. 2011 tax booklet S. 2011 tax booklet citizens and nonresident aliens living abroad for purposes of this provision. 2011 tax booklet Wages, RRTA compensation, and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold. 2011 tax booklet For more information, see Form 8959, Additional Medicare Tax, and its instructions or visit www. 2011 tax booklet irs. 2011 tax booklet gov and enter the following words in the search box: Additional Medicare Tax. 2011 tax booklet You cannot include the Additional Medicare Tax as a deductible part of your self-employment tax. 2011 tax booklet Net Investment Income Tax Beginning in 2013, the Net Investment Income Tax (NIIT) imposes a 3. 2011 tax booklet 8% tax on the lesser of an individual’s net investment income or the excess of the individual’s modified adjusted gross income over a specified threshold amount. 2011 tax booklet Bona fide residents of Puerto Rico and American Samoa who may have a federal income tax return filing obligation may be liable for the NIIT if the taxpayer’s modified adjusted gross income from non-territory sources exceeds a specified threshold amount. 2011 tax booklet The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. 2011 tax booklet Bona fide residents must take into account any additional tax liability associated with the NIIT when calculating your estimated tax payments. 2011 tax booklet Forms to file. 2011 tax booklet   If you are a bona fide resident of American Samoa and Puerto Rico and you are required to pay the NIIT, you must file Form 1040 with the United States and attach Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts. 2011 tax booklet For more information, see Form 8960 and its instructions. 2011 tax booklet Paying Your Taxes You may find that not all of your income tax has been paid through withholding by either the United States or the possession. 2011 tax booklet This is often true if you have income that is not subject to withholding, such as self-employment, interest, or rental income. 2011 tax booklet In this situation, you may need to make estimated tax payments. 2011 tax booklet Estimated Tax If your estimated income tax obligation is to the United States, use the worksheet in the Form 1040-ES package to figure your estimated tax, including self-employment tax. 2011 tax booklet Include the Additional Medicare Tax and Net Investment Income Tax if applicable. 2011 tax booklet If you are paying by check or money order, use the payment vouchers in the Form 1040-ES package. 2011 tax booklet Or, you can make your payments electronically and not have to file any paper forms. 2011 tax booklet See the Form 1040-ES instructions for information on making payments. 2011 tax booklet Double Taxation Mutual agreement procedures exist to settle issues where there is inconsistent tax treatment between the IRS and the taxing authorities of the following possessions. 2011 tax booklet American Samoa. 2011 tax booklet The Commonwealth of Puerto Rico. 2011 tax booklet The Commonwealth of the Northern Mariana Islands. 2011 tax booklet Guam. 2011 tax booklet The U. 2011 tax booklet S. 2011 tax booklet Virgin Islands. 2011 tax booklet These issues usually involve allocations of income, deductions, credits, or allowances between related persons; determinations of residency; and determinations of the source of income and related expenses. 2011 tax booklet Competent Authority Assistance The tax coordination agreements between the United States and the possession tax departments contain provisions allowing the competent authorities of the United States and the relevant possession to resolve, by mutual agreement, inconsistent tax treatment by the two jurisdictions. 2011 tax booklet How to make your request. 2011 tax booklet   Your request for competent authority assistance must include all the information listed in Revenue Procedure 2006-23, 2006-20 I. 2011 tax booklet R. 2011 tax booklet B. 2011 tax booklet 900 available at www. 2011 tax booklet irs. 2011 tax booklet gov/pub/irs-irbs/irb06-49. 2011 tax booklet pdf. 2011 tax booklet    Also, see Notice 2013-78, which provides proposed updates to the procedures for requesting U. 2011 tax booklet S. 2011 tax booklet competent authority assistance under tax treaties. 2011 tax booklet As noted, an update to Revenue Procedure 2006-23 will be published in the future. 2011 tax booklet   Your request must be in the form of a letter addressed to the Deputy Commissioner (International) LB&I. 2011 tax booklet It must contain a statement that competent authority assistance is requested under the mutual agreement procedure with the possession. 2011 tax booklet You (or a person having authority to sign your federal return) must sign and date the request. 2011 tax booklet    Send your written request for U. 2011 tax booklet S. 2011 tax booklet assistance under this procedure to:   Deputy Commissioner (International) Large Business and International Division Internal Revenue Service 1111 Constitution Avenue, N. 2011 tax booklet W. 2011 tax booklet  Routing: M4-365 Washington, DC 20224 (Attention: TAIT) Nonresident aliens generally must present their initial request for assistance to the relevant possession tax agency. 2011 tax booklet Credit or Refund In addition to the tax assistance request, if you seek a credit or refund of any overpayment of U. 2011 tax booklet S. 2011 tax booklet tax paid on the income in question, you should file a claim on Form 1040X, Amended U. 2011 tax booklet S. 2011 tax booklet Individual Income Tax Return. 2011 tax booklet Indicate on the form that a request for assistance under the mutual agreement procedure with the possession has been filed. 2011 tax booklet Attach a copy of the request to the form. 2011 tax booklet Also, you should take whatever steps must be taken under the possession tax code to prevent the expiration of the statutory period for filing a claim for credit or refund of a possession tax. 2011 tax booklet See Revenue Procedure 2006-54 (or its successor), section 9, for complete information. 2011 tax booklet Prev  Up  Next   Home   More Online Publications
 
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The 2011 Tax Booklet

2011 tax booklet 25. 2011 tax booklet   Nonbusiness Casualty and Theft Losses Table of Contents What's New Introduction Useful Items - You may want to see: CasualtyFamily pet. 2011 tax booklet Progressive deterioration. 2011 tax booklet Damage from corrosive drywall. 2011 tax booklet Theft Loss on Deposits Proof of Loss Figuring a LossDecrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Single Casualty on Multiple Properties Deduction Limits$100 Rule 10% Rule When To Report Gains and LossesDisaster Area Loss How To Report Gains and Losses What's New New Section C of Form 4684 for Ponzi-type investment schemes. 2011 tax booklet  Section C of Form 4684 is new for 2013. 2011 tax booklet You must complete Section C if you are claiming a theft loss deduction due to a Ponzi-type investment scheme and are using Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58. 2011 tax booklet Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. 2011 tax booklet You do not need to complete Appendix A. 2011 tax booklet For details, see Losses from Ponzi-type investment schemes , in this chapter. 2011 tax booklet Introduction This chapter explains the tax treatment of personal (not business or investment related) casualty losses, theft losses, and losses on deposits. 2011 tax booklet The chapter also explains the following  topics. 2011 tax booklet How to figure the amount of your loss. 2011 tax booklet How to treat insurance and other reimbursements you receive. 2011 tax booklet The deduction limits. 2011 tax booklet When and how to report a casualty or theft. 2011 tax booklet Forms to file. 2011 tax booklet    When you have a casualty or theft, you have to file Form 4684. 2011 tax booklet You will also have to file one or more of the following forms. 2011 tax booklet Schedule A (Form 1040), Itemized Deductions Schedule D (Form 1040), Capital Gains and Losses Condemnations. 2011 tax booklet   For information on condemnations of property, see Involuntary Conversions in chapter 1 of Publication 544, Sales and Other Disposition of Assets. 2011 tax booklet Workbook for casualties and thefts. 2011 tax booklet    Publication 584 is available to help you make a list of your stolen or damaged personal-use property and figure your loss. 2011 tax booklet It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. 2011 tax booklet Business or investment-related losses. 2011 tax booklet   For information on a casualty or theft loss of business or income-producing property, see Publication 547, Casualties, Disasters, and Thefts. 2011 tax booklet Useful Items - You may want to see: Publication 544 Sales and Other Dispositions  of Assets 547 Casualties, Disasters, and   Thefts 584 Casualty, Disaster, and Theft   Loss Workbook (Personal-Use  Property) Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule D (Form 1040) Capital Gains and Losses 4684 Casualties and Thefts Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. 2011 tax booklet A sudden event is one that is swift, not gradual or progressive. 2011 tax booklet An unexpected event is one that is ordinarily unanticipated and unintended. 2011 tax booklet 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. 2011 tax booklet Deductible losses. 2011 tax booklet   Deductible casualty losses can result from a number of different causes, including the following. 2011 tax booklet Car accidents (but see Nondeductible losses , next, for exceptions). 2011 tax booklet Earthquakes. 2011 tax booklet Fires (but see Nondeductible losses , next, for exceptions). 2011 tax booklet Floods. 2011 tax booklet Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses in Publication 547. 2011 tax booklet Mine cave-ins. 2011 tax booklet Shipwrecks. 2011 tax booklet Sonic booms. 2011 tax booklet Storms, including hurricanes and tornadoes. 2011 tax booklet Terrorist attacks. 2011 tax booklet Vandalism. 2011 tax booklet Volcanic eruptions. 2011 tax booklet Nondeductible losses. 2011 tax booklet   A casualty loss is not deductible if the damage or destruction is caused by the following. 2011 tax booklet Accidentally breaking articles such as glassware or china under normal conditions. 2011 tax booklet A family pet (explained below). 2011 tax booklet A fire if you willfully set it or pay someone else to set it. 2011 tax booklet A car accident if your willful negligence or willful act caused it. 2011 tax booklet The same is true if the willful act or willful negligence of someone acting for you caused the accident. 2011 tax booklet Progressive deterioration (explained later). 2011 tax booklet Family pet. 2011 tax booklet   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. 2011 tax booklet Example. 2011 tax booklet Your antique oriental rug was damaged by your new puppy before it was housebroken. 2011 tax booklet Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. 2011 tax booklet Progressive deterioration. 2011 tax booklet    Loss of property due to progressive deterioration is not deductible as a casualty loss. 2011 tax booklet This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. 2011 tax booklet The following are examples of damage due to progressive deterioration. 2011 tax booklet The steady weakening of a building due to normal wind and weather conditions. 2011 tax booklet The deterioration and damage to a water heater that bursts. 2011 tax booklet However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. 2011 tax booklet Most losses of property caused by droughts. 2011 tax booklet To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. 2011 tax booklet Termite or moth damage. 2011 tax booklet The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. 2011 tax booklet However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. 2011 tax booklet Damage from corrosive drywall. 2011 tax booklet   Under a special procedure, you may be able to claim a casualty loss deduction for amounts you paid to repair damage to your home and household appliances that resulted from corrosive drywall. 2011 tax booklet For details, see Publication 547. 2011 tax booklet Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. 2011 tax booklet The taking of property must be illegal under the laws of the state where it occurred and it must have been done with criminal intent. 2011 tax booklet You do not need to show a conviction for theft. 2011 tax booklet Theft includes the taking of money or property by the following means. 2011 tax booklet Blackmail. 2011 tax booklet Burglary. 2011 tax booklet Embezzlement. 2011 tax booklet Extortion. 2011 tax booklet Kidnapping for ransom. 2011 tax booklet Larceny. 2011 tax booklet Robbery. 2011 tax booklet The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. 2011 tax booklet Decline in market value of stock. 2011 tax booklet   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. 2011 tax booklet 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. 2011 tax booklet You report a capital loss on Schedule D (Form 1040). 2011 tax booklet For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. 2011 tax booklet Mislaid or lost property. 2011 tax booklet   The simple disappearance of money or property is not a theft. 2011 tax booklet 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. 2011 tax booklet Sudden, unexpected, and unusual events are defined earlier. 2011 tax booklet Example. 2011 tax booklet A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. 2011 tax booklet The diamond falls from the ring and is never found. 2011 tax booklet The loss of the diamond is a casualty. 2011 tax booklet Losses from Ponzi-type investment schemes. 2011 tax booklet   If you had a loss from a Ponzi-type investment scheme, see: Revenue Ruling 2009-9, 2009-14 I. 2011 tax booklet R. 2011 tax booklet B. 2011 tax booklet 735 (available at www. 2011 tax booklet irs. 2011 tax booklet gov/irb/2009-14_IRB/ar07. 2011 tax booklet html). 2011 tax booklet Revenue Procedure 2009-20, 2009-14 I. 2011 tax booklet R. 2011 tax booklet B. 2011 tax booklet 749 (available at www. 2011 tax booklet irs. 2011 tax booklet gov/irb/2009-14_IRB/ar11. 2011 tax booklet html). 2011 tax booklet Revenue Procedure 2011-58, 2011-50 I. 2011 tax booklet R. 2011 tax booklet B. 2011 tax booklet 849 (available at www. 2011 tax booklet irs. 2011 tax booklet gov/irb/2011-50_IRB/ar11. 2011 tax booklet html). 2011 tax booklet 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. 2011 tax booklet Skip lines 19 to 27. 2011 tax booklet Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. 2011 tax booklet You do not need to complete Appendix A. 2011 tax booklet For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. 2011 tax booklet   If you choose not to use the procedures in Revenue Procedure 2009-20, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. 2011 tax booklet Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. 2011 tax booklet If you incurred this type of loss, you can choose one of the following ways to deduct the loss. 2011 tax booklet As a casualty loss. 2011 tax booklet As an ordinary loss. 2011 tax booklet As a nonbusiness bad debt. 2011 tax booklet Casualty loss or ordinary loss. 2011 tax booklet   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. 2011 tax booklet The choice is generally 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. 2011 tax booklet 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. 2011 tax booklet 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. 2011 tax booklet Once you make this choice, you cannot change it without permission from the Internal Revenue Service. 2011 tax booklet   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. 2011 tax booklet The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. 2011 tax booklet Your loss is subject to the 2%-of-adjusted-gross-income limit. 2011 tax booklet You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. 2011 tax booklet Nonbusiness bad debt. 2011 tax booklet   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. 2011 tax booklet How to report. 2011 tax booklet   The kind of deduction you choose for your loss on deposits determines how you report your loss. 2011 tax booklet If you choose: Casualty loss — report it on Form 4684 first and then on Schedule A (Form 1040). 2011 tax booklet Ordinary loss — report it on Schedule A (Form 1040) as a miscellaneous itemized deduction. 2011 tax booklet Nonbusiness bad debt — report it on Form 8949 first and then on Schedule D (Form 1040). 2011 tax booklet More information. 2011 tax booklet   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684 or Deposit in Insolvent or Bankrupt Financial Institution in Publication 550. 2011 tax booklet Proof of Loss To deduct a casualty or theft loss, you must be able to prove that you had a casualty or theft. 2011 tax booklet You also must be able to support the amount you take as a deduction. 2011 tax booklet Casualty loss proof. 2011 tax booklet   For a casualty loss, your records should show all the following. 2011 tax booklet The type of casualty (car accident, fire, storm, etc. 2011 tax booklet ) and when it occurred. 2011 tax booklet That the loss was a direct result of the casualty. 2011 tax booklet 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. 2011 tax booklet Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. 2011 tax booklet Theft loss proof. 2011 tax booklet   For a theft loss, your records should show all the following. 2011 tax booklet When you discovered that your property was missing. 2011 tax booklet That your property was stolen. 2011 tax booklet That you were the owner of the property. 2011 tax booklet Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. 2011 tax booklet It is important that you have records that will prove your deduction. 2011 tax booklet If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. 2011 tax booklet Figuring a Loss Figure the amount of your loss using the following steps. 2011 tax booklet Determine your adjusted basis in the property before the casualty or theft. 2011 tax booklet Determine the decrease in fair market value of the property as a result of the casualty or theft. 2011 tax booklet From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. 2011 tax booklet 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. 2011 tax booklet Gain from reimbursement. 2011 tax booklet   If your reimbursement is more than your adjusted basis in the property, you have a gain. 2011 tax booklet This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. 2011 tax booklet If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. 2011 tax booklet See Publication 547 for more information on how to treat a gain from a reimbursement for a casualty or theft. 2011 tax booklet Leased property. 2011 tax booklet   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. 2011 tax booklet 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. 2011 tax booklet 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. 2011 tax booklet FMV of stolen property. 2011 tax booklet   The FMV of property immediately after a theft is considered to be zero, since you no longer have the property. 2011 tax booklet Example. 2011 tax booklet Several years ago, you purchased silver dollars at face value for $150. 2011 tax booklet This is your adjusted basis in the property. 2011 tax booklet Your silver dollars were stolen this year. 2011 tax booklet The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. 2011 tax booklet Your theft loss is $150. 2011 tax booklet Recovered stolen property. 2011 tax booklet   Recovered stolen property is your property that was stolen and later returned to you. 2011 tax booklet 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. 2011 tax booklet Use this amount to refigure your total loss for the year in which the loss was deducted. 2011 tax booklet   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. 2011 tax booklet But report the difference only up to the amount of the loss that reduced your tax. 2011 tax booklet For more information on the amount to report, see Recoveries in chapter 12. 2011 tax booklet 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. 2011 tax booklet However, other measures can also be used to establish certain decreases. 2011 tax booklet Appraisal. 2011 tax booklet   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterward should be made by a competent appraiser. 2011 tax booklet The appraiser must recognize the effects of any general market decline that may occur along with the casualty. 2011 tax booklet This information is needed to limit any deduction to the actual loss resulting from damage to the property. 2011 tax booklet   Several factors are important in evaluating the accuracy of an appraisal, including the following. 2011 tax booklet The appraiser's familiarity with your property before and after the casualty or theft. 2011 tax booklet The appraiser's knowledge of sales of comparable property in the area. 2011 tax booklet The appraiser's knowledge of conditions in the area of the casualty. 2011 tax booklet The appraiser's method of appraisal. 2011 tax booklet    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. 2011 tax booklet For more information on disasters, see Disaster Area Losses, in Pub. 2011 tax booklet 547. 2011 tax booklet Cost of cleaning up or making repairs. 2011 tax booklet   The cost of repairing damaged property is not part of a casualty loss. 2011 tax booklet Neither is the cost of cleaning up after a casualty. 2011 tax booklet But you can use the cost of cleaning up or making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. 2011 tax booklet The repairs are actually made. 2011 tax booklet The repairs are necessary to bring the property back to its condition before the casualty. 2011 tax booklet The amount spent for repairs is not excessive. 2011 tax booklet The repairs take care of the damage only. 2011 tax booklet The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. 2011 tax booklet Landscaping. 2011 tax booklet   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. 2011 tax booklet You may be able to measure your loss by what you spend on the following. 2011 tax booklet Removing destroyed or damaged trees and shrubs minus any salvage you receive. 2011 tax booklet Pruning and other measures taken to preserve damaged trees and shrubs. 2011 tax booklet Replanting necessary to restore the property to its approximate value before the casualty. 2011 tax booklet Car value. 2011 tax booklet    Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. 2011 tax booklet You can use the book's retail values and modify them by such factors as mileage and the condition of your car to figure its value. 2011 tax booklet 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. 2011 tax booklet If your car is not listed in the books, determine its value from other sources. 2011 tax booklet A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. 2011 tax booklet 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. 2011 tax booklet Cost of protection. 2011 tax booklet   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. 2011 tax booklet The amount you spend on insurance or to board up your house against a storm is not part of your loss. 2011 tax booklet   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. 2011 tax booklet An example would be the cost of a dike to prevent flooding. 2011 tax booklet Exception. 2011 tax booklet   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. 2011 tax booklet See Disaster Area Losses in Publication 547. 2011 tax booklet Incidental expenses. 2011 tax booklet   Any incidental expenses you have 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. 2011 tax booklet Replacement cost. 2011 tax booklet   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. 2011 tax booklet Sentimental value. 2011 tax booklet   Do not consider sentimental value when determining your loss. 2011 tax booklet 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. 2011 tax booklet Decline in market value of property in or near casualty area. 2011 tax booklet   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. 2011 tax booklet You have a loss only for actual casualty damage to your property. 2011 tax booklet However, if your home is in a federally declared disaster area, see Disaster Area Losses in Publication 547. 2011 tax booklet Costs of photographs and appraisals. 2011 tax booklet    Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. 2011 tax booklet Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. 2011 tax booklet    Appraisals are used to figure the decrease in FMV because of a casualty or theft. 2011 tax booklet See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. 2011 tax booklet   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. 2011 tax booklet You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). 2011 tax booklet For information about miscellaneous deductions, see chapter 28. 2011 tax booklet Adjusted Basis Adjusted basis is your basis in the property (usually cost) increased or decreased by various events, such as improvements and casualty losses. 2011 tax booklet For more information, see chapter 13. 2011 tax booklet Insurance and Other Reimbursements If you receive an insurance payment or other type of reimbursement, you must subtract the reimbursement when you figure your loss. 2011 tax booklet You do not have a casualty or theft loss to the extent you are reimbursed. 2011 tax booklet If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. 2011 tax booklet You must reduce your loss even if you do not receive payment until a later tax year. 2011 tax booklet See Reimbursement Received After Deducting Loss , later. 2011 tax booklet Failure to file a claim for reimbursement. 2011 tax booklet   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. 2011 tax booklet Otherwise, you cannot deduct this loss as a casualty or theft loss. 2011 tax booklet However, this rule does not apply to the portion of the loss not covered by insurance (for example, a deductible). 2011 tax booklet Example. 2011 tax booklet You have a car insurance policy with a $1,000 deductible. 2011 tax booklet Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the deduction limits discussed later). 2011 tax booklet This is true even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. 2011 tax booklet Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. 2011 tax booklet Other types of reimbursements are discussed next. 2011 tax booklet Also see the Instructions for Form 4684. 2011 tax booklet Employer's emergency disaster fund. 2011 tax booklet   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. 2011 tax booklet Take into consideration only the amount you used to replace your destroyed or damaged property. 2011 tax booklet Example. 2011 tax booklet Your home was extensively damaged by a tornado. 2011 tax booklet Your loss after reimbursement from your insurance company was $10,000. 2011 tax booklet Your employer set up a disaster relief fund for its employees. 2011 tax booklet Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. 2011 tax booklet You received $4,000 from the fund and spent the entire amount on repairs to your home. 2011 tax booklet In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. 2011 tax booklet Your casualty loss before applying the deduction limits discussed later is $6,000. 2011 tax booklet Cash gifts. 2011 tax booklet   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. 2011 tax booklet This applies even if you use the money to pay for repairs to property damaged in the disaster. 2011 tax booklet Example. 2011 tax booklet Your home was damaged by a hurricane. 2011 tax booklet Relatives and neighbors made cash gifts to you that were excludable from your income. 2011 tax booklet You used part of the cash gifts to pay for repairs to your home. 2011 tax booklet There were no limits or restrictions on how you could use the cash gifts. 2011 tax booklet Because it was an excludable gift, the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. 2011 tax booklet Insurance payments for living expenses. 2011 tax booklet   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. 2011 tax booklet You lose the use of your main home because of a casualty. 2011 tax booklet Government authorities do not allow you access to your main home because of a casualty or threat of one. 2011 tax booklet Inclusion in income. 2011 tax booklet   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. 2011 tax booklet Report this amount on Form 1040, line 21. 2011 tax booklet However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. 2011 tax booklet See Qualified disaster relief payments, under Disaster Area Losses in Publication 547. 2011 tax booklet   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. 2011 tax booklet Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. 2011 tax booklet Generally, these expenses include the amounts you pay for the following. 2011 tax booklet Rent for suitable housing. 2011 tax booklet Transportation. 2011 tax booklet Food. 2011 tax booklet Utilities. 2011 tax booklet Miscellaneous services. 2011 tax booklet 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. 2011 tax booklet Example. 2011 tax booklet As a result of a fire, you vacated your apartment for a month and moved to a motel. 2011 tax booklet You normally pay $525 a month for rent. 2011 tax booklet None was charged for the month the apartment was vacated. 2011 tax booklet Your motel rent for this month was $1,200. 2011 tax booklet You normally pay $200 a month for food. 2011 tax booklet Your food expenses for the month you lived in the motel were $400. 2011 tax booklet You received $1,100 from your insurance company to cover your living expenses. 2011 tax booklet You determine the payment you must include in income as follows. 2011 tax booklet 1) Insurance payment for living expenses $1,100 2) Actual expenses during the month you are unable to use your home because of fire 1,600   3) Normal living expenses 725   4) Temporary increase in living  expenses: Subtract line 3 from line 2 875 5) Amount of payment includible  in income: Subtract line 4  from line 1 $ 225 Tax year of inclusion. 2011 tax booklet   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. 2011 tax booklet Example. 2011 tax booklet Your main home was destroyed by a tornado in August 2011. 2011 tax booklet You regained use of your home in November 2012. 2011 tax booklet The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. 2011 tax booklet You include this amount in income on your 2012 Form 1040. 2011 tax booklet 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. 2011 tax booklet Disaster relief. 2011 tax booklet   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. 2011 tax booklet Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster are not taxable income to you. 2011 tax booklet For more information, see Disaster Area Losses in Publication 547. 2011 tax booklet Disaster unemployment assistance payments are unemployment benefits that are taxable. 2011 tax booklet Generally, disaster relief grants and qualified disaster mitigation payments made under the Robert T. 2011 tax booklet Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not includible in your income. 2011 tax booklet See Disaster Area Losses in Publication 547. 2011 tax booklet Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you receive your actual reimbursement. 2011 tax booklet This section explains the adjustment you may have to make. 2011 tax booklet Actual reimbursement less than expected. 2011 tax booklet   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. 2011 tax booklet Example. 2011 tax booklet Your personal car had an FMV of $2,000 when it was destroyed in a collision with another car in 2012. 2011 tax booklet The accident was due to the negligence of the other driver. 2011 tax booklet At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. 2011 tax booklet You did not have a deductible loss in 2012. 2011 tax booklet In January 2013, the court awarded you a judgment of $2,000. 2011 tax booklet However, in July it became apparent that you will be unable to collect any amount from the other driver. 2011 tax booklet You can deduct the loss in 2013 subject to the limits discussed later. 2011 tax booklet Actual reimbursement more than expected. 2011 tax booklet   If you later receive more reimbursement than you expected after you claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. 2011 tax booklet 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. 2011 tax booklet You do not refigure your tax for the year you claimed the deduction. 2011 tax booklet For more information, see Recoveries in chapter 12. 2011 tax booklet 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. 2011 tax booklet 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. 2011 tax booklet Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. 2011 tax booklet See Figuring a Gain in Publication 547 for more information on how to treat a gain from the reimbursement of a casualty or theft. 2011 tax booklet Actual reimbursement same as expected. 2011 tax booklet   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. 2011 tax booklet Example. 2011 tax booklet In December 2013, you had a collision while driving your personal car. 2011 tax booklet Repairs to the car cost $950. 2011 tax booklet You had $100 deductible collision insurance. 2011 tax booklet Your insurance company agreed to reimburse you for the rest of the damage. 2011 tax booklet Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. 2011 tax booklet Due to the $100 rule (discussed later under Deduction Limits ), you cannot deduct the $100 you paid as the deductible. 2011 tax booklet When you receive the $850 from the insurance company in 2014, do not report it as income. 2011 tax booklet Single Casualty on Multiple Properties Personal property. 2011 tax booklet   Personal property is any property that is not real property. 2011 tax booklet 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. 2011 tax booklet Then combine these separate losses to figure the total loss from that casualty or theft. 2011 tax booklet Example. 2011 tax booklet A fire in your home destroyed an upholstered chair, an oriental rug, and an antique table. 2011 tax booklet You did not have fire insurance to cover your loss. 2011 tax booklet (This was the only casualty or theft you had during the year. 2011 tax booklet ) You paid $750 for the chair and you established that it had an FMV of $500 just before the fire. 2011 tax booklet The rug cost $3,000 and had an FMV of $2,500 just before the fire. 2011 tax booklet You bought the table at an auction for $100 before discovering it was an antique. 2011 tax booklet It had been appraised at $900 before the fire. 2011 tax booklet You figure your loss on each of these items as follows:     Chair Rug Table 1) Basis (cost) $750 $3,000 $100 2) FMV before fire $500 $2,500 $900 3) FMV after fire –0– –0– –0– 4) Decrease in FMV $500 $2,500 $900 5) Loss (smaller of (1) or  (4)) $500 $2,500 $100           6) Total loss     $3,100 Real property. 2011 tax booklet   In figuring a casualty loss on personal-use real property, treat the entire property (including any improvements, such as buildings, trees, and shrubs) as one item. 2011 tax booklet Figure the loss using the smaller of the adjusted basis or the decrease in FMV of the entire property. 2011 tax booklet Example. 2011 tax booklet You bought your home a few years ago. 2011 tax booklet You paid $160,000 ($20,000 for the land and $140,000 for the house). 2011 tax booklet You also spent $2,000 for landscaping. 2011 tax booklet This year a fire destroyed your home. 2011 tax booklet The fire also damaged the shrubbery and trees in your yard. 2011 tax booklet The fire was your only casualty or theft loss this year. 2011 tax booklet Competent appraisers valued the property as a whole at $200,000 before the fire, but only $30,000 after the fire. 2011 tax booklet (The loss to your household furnishings is not shown in this example. 2011 tax booklet It would be figured separately on each item, as explained earlier under Personal property . 2011 tax booklet ) Shortly after the fire, the insurance company paid you $155,000 for the loss. 2011 tax booklet You figure your casualty loss as follows: 1) Adjusted basis of the entire property (land, building, and landscaping) $162,000 2) FMV of entire property before fire $200,000 3) FMV of entire property after fire 30,000 4) Decrease in FMV of entire  property $170,000 5) Loss (smaller of (1) or (4)) $162,000 6) Subtract insurance 155,000 7) Amount of loss after reimbursement $7,000 Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. 2011 tax booklet If the loss was to property for your personal use or your family's use, there are two limits on the amount you can deduct for your casualty or theft loss. 2011 tax booklet You must reduce each casualty or theft loss by $100 ($100 rule). 2011 tax booklet You must further reduce the total of all your casualty or theft losses by 10% of your adjusted gross income (10% rule). 2011 tax booklet You make these reductions on Form 4684. 2011 tax booklet These rules are explained next and Table 25-1 summarizes how to apply the $100 rule and the 10% rule in various situations. 2011 tax booklet For more detailed explanations and examples, see Publication 547. 2011 tax booklet Table 25-1. 2011 tax booklet How To Apply the Deduction Limits for Personal-Use Property   $100 Rule 10% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. 2011 tax booklet Apply this rule after you have figured the amount of your loss. 2011 tax booklet You must reduce your total casualty or theft loss by 10% of your adjusted gross income. 2011 tax booklet Apply this rule after you reduce each loss by $100 (the $100 rule). 2011 tax booklet Single Event Apply this rule only once, even if many pieces of property are affected. 2011 tax booklet Apply this rule only once, even if many pieces of property are affected. 2011 tax booklet More Than One Event Apply to the loss from each event. 2011 tax booklet Apply to the total of all your losses from all events. 2011 tax booklet More Than One Person— With Loss From the Same Event (other than a married couple filing jointly) Apply separately to each person. 2011 tax booklet Apply separately to each person. 2011 tax booklet Married Couple—With Loss From the Same Event Filing Jointly Apply as if you were one person. 2011 tax booklet Apply as if you were one person. 2011 tax booklet Filing Separately Apply separately to each spouse. 2011 tax booklet Apply separately to each spouse. 2011 tax booklet More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. 2011 tax booklet Apply separately to each owner of jointly owned property. 2011 tax booklet Property used partly for business and partly for personal purposes. 2011 tax booklet   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 part and for the business or income-producing part. 2011 tax booklet You must figure each loss separately because the $100 rule and the 10% rule apply only to the loss on the personal-use part of the property. 2011 tax booklet $100 Rule After you have figured your casualty or theft loss on personal-use property, you must reduce that loss by $100. 2011 tax booklet This reduction applies to each total casualty or theft loss. 2011 tax booklet It does not matter how many pieces of property are involved in an event. 2011 tax booklet Only a single $100 reduction applies. 2011 tax booklet Example. 2011 tax booklet A hailstorm damages your home and your car. 2011 tax booklet Determine the amount of loss, as discussed earlier, for each of these items. 2011 tax booklet Since the losses are due to a single event, you combine the losses and reduce the combined amount by $100. 2011 tax booklet Single event. 2011 tax booklet   Generally, events closely related in origin cause a single casualty. 2011 tax booklet 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. 2011 tax booklet 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. 2011 tax booklet Apply this rule after you reduce each loss by $100. 2011 tax booklet For more information, see the Form 4684 instructions. 2011 tax booklet If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. 2011 tax booklet Example 1. 2011 tax booklet In June, you discovered that your house had been burglarized. 2011 tax booklet Your loss after insurance reimbursement was $2,000. 2011 tax booklet Your adjusted gross income for the year you discovered the theft is $29,500. 2011 tax booklet You first apply the $100 rule and then the 10% rule. 2011 tax booklet Figure your theft loss deduction as follows. 2011 tax booklet 1) Loss after insurance $2,000 2) Subtract $100 100 3) Loss after $100 rule $1,900 4) Subtract 10% × $29,500 AGI 2,950 5) Theft loss deduction –0– You do not have a theft loss deduction because your loss after you apply the $100 rule ($1,900) is less than 10% of your adjusted gross income ($2,950). 2011 tax booklet Example 2. 2011 tax booklet In March, you had a car accident that totally destroyed your car. 2011 tax booklet You did not have collision insurance on your car, so you did not receive any insurance reimbursement. 2011 tax booklet Your loss on the car was $1,800. 2011 tax booklet In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items stored there. 2011 tax booklet Your loss on the basement items after reimbursement was $2,100. 2011 tax booklet Your adjusted gross income for the year that the accident and fire occurred is $25,000. 2011 tax booklet You figure your casualty loss deduction as follows. 2011 tax booklet       Base-     Car ment 1) Loss $1,800 $2,100 2) Subtract $100 per incident 100 100 3) Loss after $100 rule $1,700 $2,000 4) Total loss $3,700 5) Subtract 10% × $25,000 AGI 2,500 6) Casualty loss deduction $1,200 Gains and losses. 2011 tax booklet   If you had both gains and losses from casualties or thefts to personal-use property, you must compare your total gains to your total losses. 2011 tax booklet 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. 2011 tax booklet Casualty or theft gains do not include gains you choose to postpone. 2011 tax booklet See Publication 547 for information on the postponement of gain. 2011 tax booklet Losses more than gains. 2011 tax booklet   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. 2011 tax booklet The rest, if any, is your deductible loss from personal-use property. 2011 tax booklet Gains more than losses. 2011 tax booklet   If your recognized gains are more than your losses, subtract your losses from your gains. 2011 tax booklet The difference is treated as capital gain and must be reported on Schedule D (Form 1040). 2011 tax booklet The 10% rule does not apply to your gains. 2011 tax booklet When To Report Gains and Losses Gains. 2011 tax booklet   If you receive an insurance or other reimbursement that is more than your adjusted basis in the destroyed or stolen property, you have a gain from the casualty or theft. 2011 tax booklet You must include this gain in your income in the year you receive the reimbursement, unless you choose to postpone reporting the gain as explained in Publication 547. 2011 tax booklet If you have a loss, see Table 25-2 . 2011 tax booklet Table 25-2. 2011 tax booklet When To Deduct a Loss IF you have a loss. 2011 tax booklet . 2011 tax booklet . 2011 tax booklet THEN deduct it in the year. 2011 tax booklet . 2011 tax booklet . 2011 tax booklet from a casualty, the loss occurred. 2011 tax booklet in a federally declared disaster area, the disaster occurred or the year immediately before the disaster. 2011 tax booklet from a theft, the theft was discovered. 2011 tax booklet on a deposit treated as a:   • casualty or any ordinary loss, a reasonable estimate can be made. 2011 tax booklet • bad debt, deposits are totally worthless. 2011 tax booklet Losses. 2011 tax booklet   Generally, you can deduct a casualty loss that is not reimbursable only in the tax year in which the casualty occurred. 2011 tax booklet This is true even if you do not repair or replace the damaged property until a later year. 2011 tax booklet   You can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. 2011 tax booklet   If you are not sure whether part of your casualty or theft loss will be reimbursed, do not deduct that part until the tax year when you become reasonably certain that it will not be reimbursed. 2011 tax booklet Loss on deposits. 2011 tax booklet   If your loss is a loss on deposits in an insolvent or bankrupt financial institution, see Loss on Deposits , earlier. 2011 tax booklet Disaster Area Loss You generally must deduct a casualty loss in the year it occurred. 2011 tax booklet However, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct the loss on your tax return or amended return for either of the following years. 2011 tax booklet The year the disaster occurred. 2011 tax booklet The year immediately preceding the year the disaster occurred. 2011 tax booklet Gains. 2011 tax booklet    Special rules apply if you choose to postpone reporting gain on property damaged or destroyed in a federally declared disaster area. 2011 tax booklet For those special rules, see Publication 547. 2011 tax booklet Postponed tax deadlines. 2011 tax booklet   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. 2011 tax booklet The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. 2011 tax booklet   If any tax deadline is postponed, the IRS will publicize the postponement in your area by publishing a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). 2011 tax booklet Go to www. 2011 tax booklet irs. 2011 tax booklet gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. 2011 tax booklet Who is eligible. 2011 tax booklet   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. 2011 tax booklet Any individual whose main home is located in a covered disaster area (defined next). 2011 tax booklet Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. 2011 tax booklet Any individual who is a relief worker affiliated with a recognized government or philanthropic organization who is assisting in a covered disaster area. 2011 tax booklet Any individual, business entity, or sole proprietorship whose records are needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. 2011 tax booklet The main home or principal place of business does not have to be located in the covered disaster area. 2011 tax booklet Any estate or trust that has tax records necessary to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. 2011 tax booklet The spouse on a joint return with a taxpayer who is eligible for postponements. 2011 tax booklet Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose records necessary to meet a postponed tax deadline are located in the covered disaster area. 2011 tax booklet Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. 2011 tax booklet Any other person determined by the IRS to be affected by a federally declared disaster. 2011 tax booklet Covered disaster area. 2011 tax booklet   This is an area of a federally declared disaster in which the IRS has decided to postpone tax deadlines for up to 1 year. 2011 tax booklet Abatement of interest and penalties. 2011 tax booklet   The IRS may abate the interest and penalties on underpaid income tax for the length of any postponement of tax deadlines. 2011 tax booklet More information. 2011 tax booklet   For more information, see Disaster Area Losses in Publication 547. 2011 tax booklet How To Report Gains and Losses Use Form 4684 to report a gain or a deductible loss from a casualty or theft. 2011 tax booklet If you have more than one casualty or theft, use a separate Form 4684 to determine your gain or loss for each event. 2011 tax booklet Combine the gains and losses on one Form 4684. 2011 tax booklet Follow the form instructions as to which lines to fill out. 2011 tax booklet In addition, you must use the appropriate schedule to report a gain or loss. 2011 tax booklet The schedule you use depends on whether you have a gain or loss. 2011 tax booklet If you have a: Report it on: Gain Schedule D (Form 1040) Loss Schedule A (Form 1040) Adjustments to basis. 2011 tax booklet   If you have a casualty or theft loss, you must decrease your basis in the property by any insurance or other reimbursement you receive, and by any deductible loss. 2011 tax booklet Amounts you spend to restore your property after a casualty increase your adjusted basis. 2011 tax booklet See Adjusted Basis in chapter 13 for more information. 2011 tax booklet Net operating loss (NOL). 2011 tax booklet    If your casualty or theft loss deduction causes your deductions for the year to be more than your income for the year, you may have an NOL. 2011 tax booklet You can use an NOL to lower your tax in an earlier year, allowing you to get a refund for tax you have already paid. 2011 tax booklet Or, you can use it to lower your tax in a later year. 2011 tax booklet You do not have to be in business to have an NOL from a casualty or theft loss. 2011 tax booklet For more information, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. 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