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2013 Tax Forms 1040ez

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2013 Tax Forms 1040ez

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

2013 tax forms 1040ez Other Methods of Depreciation Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: How To Figure the DeductionBasis Useful Life Salvage Value Methods To UseStraight Line Method Declining Balance Method Income Forecast Method How To Change Methods DispositionsSale or exchange. 2013 tax forms 1040ez Property not disposed of or abandoned. 2013 tax forms 1040ez Special rule for normal retirements from item accounts. 2013 tax forms 1040ez Abandoned property. 2013 tax forms 1040ez Single item accounts. 2013 tax forms 1040ez Multiple property account. 2013 tax forms 1040ez Topics - This chapter discusses: How to figure the deduction Methods to use How to change methods Dispositions Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 551 Basis of Assets 583 Starting a Business and Keeping Records 946 How To Depreciate Property Form (and Instructions) 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization Schedule C (Form 1040) Profit or Loss From Business If your property is being depreciated under ACRS, you must continue to use rules for depreciation that applied when you placed the property in service. 2013 tax forms 1040ez If your property qualified for MACRS, you must depreciate it under MACRS. 2013 tax forms 1040ez See Publication 946. 2013 tax forms 1040ez However, you cannot use MACRS for certain property because of special rules that exclude it from MACRS. 2013 tax forms 1040ez Also, you can elect to exclude certain property from being depreciated under MACRS. 2013 tax forms 1040ez Property that you cannot depreciate using MACRS includes: Intangible property, Property you can elect to exclude from MACRS that you properly depreciate under a method that is not based on a term of years, Certain public utility property, Any motion picture film or video tape, Any sound recording, and Certain real and personal property placed in service before 1987. 2013 tax forms 1040ez Intangible property. 2013 tax forms 1040ez   You cannot depreciate intangible property under ACRS or MACRS. 2013 tax forms 1040ez You depreciate intangible property using any other reasonable method, usually, the straight line method. 2013 tax forms 1040ez Note. 2013 tax forms 1040ez The cost of certain intangible property that you acquire after August 10, 1993, must be amortized over a 15-year period. 2013 tax forms 1040ez For more information, see chapter 12 of Publication 535. 2013 tax forms 1040ez Public utility property. 2013 tax forms 1040ez   The law excludes from MACRS any public utility property for which the taxpayer does not use a normalization method of accounting. 2013 tax forms 1040ez This type of property is subject to depreciation under a special rule. 2013 tax forms 1040ez Videocassettes. 2013 tax forms 1040ez   If you are in the videocassette rental business, you can depreciate those videocassettes purchased for rental. 2013 tax forms 1040ez You can depreciate the cost less salvage value of those videocassettes that have a useful life over one year using either: The straight line method, or The income forecast method. 2013 tax forms 1040ez The straight line method, salvage value, and useful life are discussed later under Methods To Use. 2013 tax forms 1040ez You can deduct in the year of purchase as a business expense the cost of any cassette that has a useful life of one year or less. 2013 tax forms 1040ez How To Figure the Deduction Two other reasonable methods can be used to figure your deduction for property not covered under ACRS or MACRS. 2013 tax forms 1040ez These methods are straight line and declining balance. 2013 tax forms 1040ez To figure depreciation using these methods, you must generally determine three things about the property you intend to depreciate. 2013 tax forms 1040ez They are: The basis, The useful life, and The estimated salvage value at the end of its useful life. 2013 tax forms 1040ez The amount of the deduction in any year also depends on which method of depreciation you choose. 2013 tax forms 1040ez Basis To deduct the proper amount of depreciation each year, first determine your basis in the property you intend to depreciate. 2013 tax forms 1040ez The basis used for figuring depreciation is the same as the basis that would be used for figuring the gain on a sale. 2013 tax forms 1040ez Your original basis is usually the purchase price. 2013 tax forms 1040ez However, if you acquire property in some other way, such as inheriting it, getting it as a gift, or building it yourself, you have to figure your original basis in a different way. 2013 tax forms 1040ez Adjusted basis. 2013 tax forms 1040ez   Events will often change the basis of property. 2013 tax forms 1040ez When this occurs, the changed basis is called the adjusted basis. 2013 tax forms 1040ez Some events, such as improvements you make, increase basis. 2013 tax forms 1040ez Events such as deducting casualty losses and depreciation decrease basis. 2013 tax forms 1040ez If basis is adjusted, the depreciation deduction may also have to be changed, depending on the reason for the adjustment and the method of depreciation you are using. 2013 tax forms 1040ez   Publication 551 explains how to figure basis for property acquired in different ways. 2013 tax forms 1040ez It also discusses what items increase and decrease basis, how to figure adjusted basis, and how to allocate cost if you buy several pieces of property at one time. 2013 tax forms 1040ez Useful Life The useful life of a piece of property is an estimate of how long you can expect to use it in your trade or business, or to produce income. 2013 tax forms 1040ez It is the length of time over which you will make yearly depreciation deductions of your basis in the property. 2013 tax forms 1040ez It is how long it will continue to be useful to you, not how long the property will last. 2013 tax forms 1040ez Many things affect the useful life of property, such as: Frequency of use, Age when acquired, Your repair policy, and Environmental conditions. 2013 tax forms 1040ez The useful life can also be affected by technological improvements, progress in the arts, reasonably foreseeable economic changes, shifting of business centers, prohibitory laws, and other causes. 2013 tax forms 1040ez Consider all these factors before you arrive at a useful life for your property. 2013 tax forms 1040ez The useful life of the same type of property varies from user to user. 2013 tax forms 1040ez When you determine the useful life of your property, keep in mind your own experience with similar property. 2013 tax forms 1040ez You can use the general experience of the industry you are in until you are able to determine a useful life of your property from your own experience. 2013 tax forms 1040ez Change in useful life. 2013 tax forms 1040ez   You base your estimate of useful life on certain facts. 2013 tax forms 1040ez If these facts change significantly, you can adjust your estimate of the remaining useful life. 2013 tax forms 1040ez However, you redetermine the estimated useful life only when the change is substantial and there is a clear reason for making the change. 2013 tax forms 1040ez Salvage Value It is important for you to accurately determine the correct salvage value of the property you want to depreciate. 2013 tax forms 1040ez You generally cannot depreciate property below a reasonable salvage value. 2013 tax forms 1040ez Determining salvage value. 2013 tax forms 1040ez   Salvage value is the estimated value of property at the end of its useful life. 2013 tax forms 1040ez It is what you expect to get for the property if you sell it after you can no longer use it productively. 2013 tax forms 1040ez You must estimate the salvage value of a piece of property when you first acquire it. 2013 tax forms 1040ez   Salvage value is affected both by how you use the property and how long you use it. 2013 tax forms 1040ez If it is your policy to dispose of property that is still in good operating condition, the salvage value can be relatively large. 2013 tax forms 1040ez However, if your policy is to use property until it is no longer usable, its salvage value can be its junk value. 2013 tax forms 1040ez Changing salvage value. 2013 tax forms 1040ez   Once you determine the salvage value for property, you should not change it merely because prices have changed. 2013 tax forms 1040ez However, if you redetermine the useful life of property, as discussed earlier under Change in useful life, you can also redetermine the salvage value. 2013 tax forms 1040ez When you redetermine the salvage value, take into account the facts that exist at the time. 2013 tax forms 1040ez Net salvage. 2013 tax forms 1040ez   Net salvage is the salvage value of property minus what it costs to remove it when you dispose of it. 2013 tax forms 1040ez You can choose either salvage value or net salvage when you figure depreciation. 2013 tax forms 1040ez You must consistently use the one you choose and the treatment of the costs of removal must be consistent with the practice adopted. 2013 tax forms 1040ez However, if the cost to remove the property is more than the estimated salvage value, then net salvage is zero. 2013 tax forms 1040ez Your salvage value can never be less than zero. 2013 tax forms 1040ez Ten percent rule. 2013 tax forms 1040ez   If you acquire personal property that has a useful life of 3 years or more, you can use an amount for salvage value that is less than your actual estimate. 2013 tax forms 1040ez You can subtract from your estimate of salvage value an amount equal to 10% of your basis in the property. 2013 tax forms 1040ez If salvage value is less than 10% of basis, you can ignore salvage value when you figure depreciation. 2013 tax forms 1040ez Methods To Use Two methods of depreciation are the straight line and declining balance methods. 2013 tax forms 1040ez If ACRS or MACRS does not apply, you can use one of these methods. 2013 tax forms 1040ez The straight line and declining balance methods discussed in this section are not figured in the same way as straight line or declining balance methods under MACRS. 2013 tax forms 1040ez Straight Line Method Before 1981, you could use any reasonable method for every kind of depreciable property. 2013 tax forms 1040ez One of these methods was the straight line method. 2013 tax forms 1040ez This method was also used for intangible property. 2013 tax forms 1040ez It lets you deduct the same amount of depreciation each year. 2013 tax forms 1040ez To figure your deduction, determine the adjusted basis of your property, its salvage value, and its estimated useful life. 2013 tax forms 1040ez Subtract the salvage value, if any, from the adjusted basis. 2013 tax forms 1040ez The balance is the total amount of depreciation you can take over the useful life of the property. 2013 tax forms 1040ez Divide the balance by the number of years remaining in the useful life. 2013 tax forms 1040ez This gives you the amount of your yearly depreciation deduction. 2013 tax forms 1040ez Unless there is a big change in adjusted basis, or useful life, this amount will stay the same throughout the time you depreciate the property. 2013 tax forms 1040ez If, in the first year, you use the property for less than a full year, you must prorate your depreciation deduction for the number of months in use. 2013 tax forms 1040ez Example. 2013 tax forms 1040ez In April 1994, Frank bought a franchise for $5,600. 2013 tax forms 1040ez It expires in 10 years. 2013 tax forms 1040ez This property is intangible property that cannot be depreciated under MACRS. 2013 tax forms 1040ez Frank depreciates the franchise under the straight line method, using a 10-year useful life and no salvage value. 2013 tax forms 1040ez He takes the $5,600 basis and divides that amount by 10 years ($5,600 ÷ 10 = $560, a full year's use). 2013 tax forms 1040ez He must prorate the $560 for his 9 months of use in 1994. 2013 tax forms 1040ez This gives him a deduction of $420 ($560 ÷ 9/12). 2013 tax forms 1040ez In 1995, Frank can deduct $560 for the full year. 2013 tax forms 1040ez Declining Balance Method The declining balance method allows you to recover a larger amount of the cost of the property in the early years of your use of the property. 2013 tax forms 1040ez The rate cannot be more than twice the straight line rate. 2013 tax forms 1040ez Rate of depreciation. 2013 tax forms 1040ez   Under this method, you must determine your declining balance rate of depreciation. 2013 tax forms 1040ez The initial step is to: Divide the number 1 by the useful life of your property to get a straight line rate. 2013 tax forms 1040ez (For example, if property has a useful life of 5 years, its normal straight line rate of depreciation is ⅕, or 20%. 2013 tax forms 1040ez ) Multiply this straight line rate by a number that is more than 1 but not more than 2 to determine the declining balance rate. 2013 tax forms 1040ez Unless there is a change in the useful life during the time you depreciate the property, the rate of depreciation generally will not change. 2013 tax forms 1040ez Depreciation deductions. 2013 tax forms 1040ez   After you determine the rate of depreciation, multiply the adjusted basis of the property by it. 2013 tax forms 1040ez This gives you the amount of your deduction. 2013 tax forms 1040ez For example, if your adjusted basis at the beginning of the first year is $10,000, and your declining balance rate is 20%, your depreciation deduction for the first year is $2,000 ($10,000 ÷ 20%). 2013 tax forms 1040ez To figure your depreciation deduction in the second year, you must first adjust the basis for the amount of depreciation you deducted in the first year. 2013 tax forms 1040ez Subtract the previous year's depreciation from your basis ($10,000 - $2,000 = $8,000). 2013 tax forms 1040ez Multiply this amount by the rate of depreciation ($8,000 ÷ 20% = $1,600). 2013 tax forms 1040ez Your depreciation deduction for the second year is $1,600. 2013 tax forms 1040ez   As you can see from this example, your adjusted basis in the property gets smaller each year. 2013 tax forms 1040ez Also, under this method, deductions are larger in the earlier years and smaller in the later years. 2013 tax forms 1040ez You can make a change to the straight line method without consent. 2013 tax forms 1040ez Salvage value. 2013 tax forms 1040ez   Do not subtract salvage value when you figure your yearly depreciation deductions under the declining balance method. 2013 tax forms 1040ez However, you cannot depreciate the property below its reasonable salvage value. 2013 tax forms 1040ez Determine salvage value using the rules discussed earlier, including the special 10% rule. 2013 tax forms 1040ez Example. 2013 tax forms 1040ez If your adjusted basis has been decreased to $1,000 and the rate of depreciation is 20%, your depreciation deduction should be $200. 2013 tax forms 1040ez But if your estimate of salvage value was $900, you can only deduct $100. 2013 tax forms 1040ez This is because $100 is the amount that would lower your adjusted basis to equal salvage value. 2013 tax forms 1040ez Income Forecast Method The income forecast method requires income projections for each videocassette or group of videocassettes. 2013 tax forms 1040ez You can group the videocassettes by title for making this projection. 2013 tax forms 1040ez You determine the depreciation by applying a fraction to the cost less salvage value of the cassette. 2013 tax forms 1040ez The numerator is the income from the videocassette for the tax year and the denominator is the total projected income for the cassette. 2013 tax forms 1040ez For more information on the income forecast method, see Revenue Ruling 60-358 in Cumulative Bulletin 1960, Volume 2, on page 68. 2013 tax forms 1040ez How To Change Methods In some cases, you may change your method of depreciation for property depreciated under a reasonable method. 2013 tax forms 1040ez If you change your method of depreciation, it is generally a change in your method of accounting. 2013 tax forms 1040ez You must get IRS consent before making the change. 2013 tax forms 1040ez However, you do not need permission for certain changes in your method of depreciation. 2013 tax forms 1040ez The rules discussed in this section do not apply to property depreciated under ACRS or MACRS. 2013 tax forms 1040ez For information on ACRS elections,see Revocation of election, in chapter 1 under Alternate ACRS Method. 2013 tax forms 1040ez Change to the straight line method. 2013 tax forms 1040ez   You can change from the declining balance method to the straight line method at any time during the useful life of your property without IRS consent. 2013 tax forms 1040ez However, if you have a written agreement with the IRS that prohibits a change, you must first get IRS permission. 2013 tax forms 1040ez When the change is made, figure depreciation based on your adjusted basis in the property at that time. 2013 tax forms 1040ez Your adjusted basis takes into account all previous depreciation deductions. 2013 tax forms 1040ez Use the estimated remaining useful life of your property at the time of change and its estimated salvage value. 2013 tax forms 1040ez   You can change from the declining balance method to straight line only on the original tax return for the year you first use the straight line method. 2013 tax forms 1040ez You cannot make the change on an amended return filed after the due date of the original return (including extensions). 2013 tax forms 1040ez   When you make the change, attach a statement to your tax return showing: When you acquired the property, Its original cost or other original basis, The total amount claimed for depreciation and other allowances since you acquired it, Its salvage value and remaining useful life, and A description of the property and its use. 2013 tax forms 1040ez   After you change to straight line, you cannot change back to the declining balance method or to any other method for a period of 10 years without written permission from the IRS. 2013 tax forms 1040ez Changes that require permission. 2013 tax forms 1040ez   For most other changes in method of depreciation, you must get permission from the IRS. 2013 tax forms 1040ez To request a change in method of depreciation, file Form 3115. 2013 tax forms 1040ez File the application within the first 180 days of the tax year the change is to become effective. 2013 tax forms 1040ez In most cases, there is a user fee that must accompany Form 3115. 2013 tax forms 1040ez See the instructions for Form 3115 to determine if a fee is required. 2013 tax forms 1040ez Changes granted automatically. 2013 tax forms 1040ez   The IRS automatically approves certain changes of a method of depreciation. 2013 tax forms 1040ez But, you must file Form 3115 for these automatic changes. 2013 tax forms 1040ez   However, IRS can deny permission if Form 3115 is not filed on time. 2013 tax forms 1040ez For more information on automatic changes, see Revenue Procedure 74-11, 1974-1 C. 2013 tax forms 1040ez B. 2013 tax forms 1040ez 420. 2013 tax forms 1040ez Changes for which approval is not automatic. 2013 tax forms 1040ez   The automatic change procedures do not apply to: Property or an account where you made a change in depreciation within the last 10 tax years (unless the change was made under the Class Life System), Class Life Asset Depreciation Range System, and Public utility property. 2013 tax forms 1040ez   You must request and receive permission for these changes. 2013 tax forms 1040ez To make the request, file Form 3115 during the first 180 days of the tax year for which you want the change to be effective. 2013 tax forms 1040ez Change from an improper method. 2013 tax forms 1040ez   If the IRS disallows the method you are using, you do not need permission to change to a proper method. 2013 tax forms 1040ez You can adopt the straight line method, or any other method that would have been permitted if you had used it from the beginning. 2013 tax forms 1040ez If you file your tax return using an improper method, but later file an amended return, you can use a proper method on the amended return without getting IRS permission. 2013 tax forms 1040ez However, you must file the amended return before the filing date for the next tax year. 2013 tax forms 1040ez Dispositions Retirement is the permanent withdrawal of depreciable property from use in your trade or business or for the production of income. 2013 tax forms 1040ez You can do this by selling, exchanging, or abandoning the item of property. 2013 tax forms 1040ez You can also withdraw it from use without disposing of it. 2013 tax forms 1040ez For example, you could place it in a supplies or scrap account. 2013 tax forms 1040ez Retirements can be either normal or abnormal depending on all facts and circumstances. 2013 tax forms 1040ez The rules discussed next do not apply to MACRS and ACRS property. 2013 tax forms 1040ez Normal retirement. 2013 tax forms 1040ez   A normal retirement is a permanent withdrawal of depreciable property from use if the following apply: The retirement is made within the useful life you estimated originally, and The property has reached a condition at which you customarily retire or would retire similar property from use. 2013 tax forms 1040ez A retirement is generally considered normal unless you can show that you retired the property because of a reason you did not consider when you originally estimated the useful life of the property. 2013 tax forms 1040ez Abnormal retirement. 2013 tax forms 1040ez   A retirement can be abnormal if you withdraw the property early or under other circumstances. 2013 tax forms 1040ez For example, if the property is damaged by a fire or suddenly becomes obsolete and is now useless. 2013 tax forms 1040ez Gain or loss on retirement. 2013 tax forms 1040ez   There are special rules for figuring the gain or loss on retirement of property. 2013 tax forms 1040ez The gain or loss will depend on several factors. 2013 tax forms 1040ez These include the type of withdrawal, if the withdrawal was from a single property or multiple property account, and if the retirement was normal or abnormal. 2013 tax forms 1040ez A single property account contains only one item of property. 2013 tax forms 1040ez A multiple property account is one in which several items have been combined with a single rate of depreciation assigned to the entire account. 2013 tax forms 1040ez Sale or exchange. 2013 tax forms 1040ez   If property is retired by sale or exchange, you figure gain or loss by the usual rules that apply to sales or other dispositions of property. 2013 tax forms 1040ez See Publication 544. 2013 tax forms 1040ez Property not disposed of or abandoned. 2013 tax forms 1040ez   If property is retired permanently, but not disposed of or physically abandoned, you do not recognize gain. 2013 tax forms 1040ez You are allowed a loss in such a case, but only if the retirement is: An abnormal retirement, A normal retirement from a single property account in which you determined the life of each item of property separately, or A normal retirement from a multiple property account in which the depreciation rate is based on the maximum expected life of the longest lived item of property and the loss occurs before the expiration of the full useful life. 2013 tax forms 1040ez However, you are not allowed a loss if the depreciation rate is based on the average useful life of the items of property in the account. 2013 tax forms 1040ez   To figure your loss, subtract the estimated salvage or fair market value of the property at the date of retirement, whichever is more, from its adjusted basis. 2013 tax forms 1040ez Special rule for normal retirements from item accounts. 2013 tax forms 1040ez   You can generally deduct losses upon retirement of a few depreciable items of property with similar useful lives, if: You account for each one in a separate account, and You use the average useful life to figure depreciation. 2013 tax forms 1040ez However, you cannot deduct losses if you use the average useful life to figure depreciation and they have a wide range of useful lives. 2013 tax forms 1040ez   If you have a large number of depreciable property items and use average useful lives to figure depreciation, you cannot deduct the losses upon normal retirements from these accounts. 2013 tax forms 1040ez Abandoned property. 2013 tax forms 1040ez   If you physically abandon property, you can deduct as a loss the adjusted basis of the property at the time of its abandonment. 2013 tax forms 1040ez However, your intent must be to discard the property so that you will not use it again or retrieve it for sale, exchange, or other disposition. 2013 tax forms 1040ez Basis of property retired. 2013 tax forms 1040ez   The basis for figuring gain or loss on the retirement of property is its adjusted basis at the time of retirement, as determined in the following discussions. 2013 tax forms 1040ez Single item accounts. 2013 tax forms 1040ez   If an item of property is accounted for in a single item account, the adjusted basis is the basis you would use to figure gain or loss for a sale or exchange of the property. 2013 tax forms 1040ez This is generally the cost or other basis of the item of property less depreciation. 2013 tax forms 1040ez See Publication 551. 2013 tax forms 1040ez Multiple property account. 2013 tax forms 1040ez   For a normal retirement from a multiple property account, if you figured depreciation using the average expected useful life, the adjusted basis is the salvage value estimated for the item of property when it was originally acquired. 2013 tax forms 1040ez If you figured depreciation using the maximum expected useful life of the longest lived item of property in the account, you must use the depreciation method used for the multiple property account and a rate based on the maximum expected useful life of the item of property retired. 2013 tax forms 1040ez   You make the adjustment for depreciation for an abnormal retirement from a multiple property account at the rate that would be proper if the item of property was depreciated in a single property account. 2013 tax forms 1040ez The method of depreciation used for the multiple property account is used. 2013 tax forms 1040ez You base the rate on either the average expected useful life or the maximum expected useful life of the retired item of property, depending on the method used to determine the depreciation rate for the multiple property account. 2013 tax forms 1040ez Prev  Up  Next   Home   More Online Publications