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Extention

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Extention

Extention Index A Adoption Taxpayer identification number, Adoption taxpayer identification number (ATIN). Extention Aliens, Individual taxpayer identification number (ITIN) for aliens. Extention Alternative minimum tax (AMT), Limit on credit. Extention Amount of credit, Amount of Credit, Payments for prior year's expenses. Extention Limit on, Limit on credit. Extention Assistance (see Tax help) C Calculation of credit, How To Figure the Credit, Payments for prior year's expenses. Extention Camp, overnight, Camp. Extention Care Dependent care benefits, Dependent care benefits. Extention , Dependent care benefits. Extention Employer-provided benefits, Dependent Care Benefits Outside home, Care outside your home. Extention Provider identification, Provider Identification Test Qualifying person, Care of a Qualifying Person Children Divorced or separated parents, Child of divorced or separated parents or parents living apart. Extention Physically or mentally disabled, Qualifying Person Test Under age 13, Qualifying Person Test Work-related expense payments to relatives, Payments to Relatives or Dependents Church employee, Clergy or church employee. Extention Claiming of credit, How To Claim the Credit Tests to claim credit, Tests To Claim the Credit Clergy, Clergy or church employee. Extention Community property, Community property laws. Extention D Death of spouse, Death of spouse. Extention Dependent care benefits, Dependent care benefits. Extention , Dependent Care Benefits Dependent care centers, Dependent care center. Extention Dependent defined, Dependent defined. Extention Dependents (see Qualifying person test) Deposits, Fees and deposits. Extention Disabilities, persons with Dependents, Qualifying Person Test Physically or mentally not able to care for self, Physically or mentally not able to care for oneself. Extention Spouse, Qualifying Person Test, Rule for student-spouse or spouse not able to care for self. Extention , Working or Looking for Work, You or your spouse is a student or not able to care for self. Extention Divorced parents, Child of divorced or separated parents or parents living apart. Extention Dollar limit, Dollar Limit, Yearly limit. Extention Reduced dollar limit, Tests To Claim the Credit, Reduced Dollar Limit Domestic help, Housekeeper. Extention Due diligence, Due diligence. Extention E Earned income Dependent care benefits, Exclusion or deduction. Extention For figuring credit, Earned Income Test Limit on, Earned Income Limit Net loss, Net loss. Extention Nonworking spouse, Rule for student-spouse or spouse not able to care for self. Extention Self-employment earnings, Self-employment earnings. Extention Statutory employees, Statutory employee. Extention What is not, What is not earned income? Earned income test, Earned Income Test, Full-time student. Extention Determination, Tests To Claim the Credit Education expenses, Education. Extention Employer-provided dependent care benefits, Dependent care benefits. Extention , Dependent Care Benefits Employment taxes, Reminders, Taxes paid on wages. Extention , How To Claim the Credit Exclusion from income Employer-provided dependent care benefits, Dependent care benefits. Extention , Exclusion or deduction. Extention Expenses, How To Figure the Credit (see also Work-related expenses) 2012 expenses paid in 2013 (Worksheet A), Worksheet A. Extention Worksheet for 2012 Expenses Paid in 2013 Education, Education. Extention Medical, Medical expenses. Extention Not for care, Expenses not for care. Extention Prepaid, Expenses prepaid in an earlier year. Extention Reimbursed, Expenses reimbursed. Extention F Fees, Fees and deposits. Extention Figures, Tests To Claim the Credit Figuring credit, How To Figure the Credit, Payments for prior year's expenses. Extention Earned income, Earned income. Extention Filing status Joint return test, Joint Return Test Tests to claim credit, Tests To Claim the Credit Form 1040 Claiming the credit, Tests To Claim the Credit, Form 1040, Form 1040A, or Form 1040NR. Extention Form 1040A Claiming the credit, Tests To Claim the Credit Form 2441, Form 1040, Form 1040A, or Form 1040NR. Extention Form 4029, Members of certain religious faiths opposed to social security. Extention , Form 4029. Extention Form 4361, Members of certain religious faiths opposed to social security. Extention , Form 4361. Extention Form W-10, Getting the information. Extention Form W-2 Dependent care benefits, Statement for employee. Extention Form W-7, Individual taxpayer identification number (ITIN) for aliens. Extention Free tax services, Free help with your tax return. Extention H Help (see Tax help) Household services, Care of a Qualifying Person, Household Services, Meals and lodging provided for housekeeper. Extention Employment taxes, How To Claim the Credit Housekeepers, Housekeeper. Extention I Identification of provider, Provider Identification Test, Provider refusal. Extention Individual taxpayer identification numbers (ITINs) For aliens, Individual taxpayer identification number (ITIN) for aliens. Extention Inmate, What is not earned income? J Joint return test, Joint Return Test, Costs of keeping up a home. Extention Tests to claim credit, Tests To Claim the Credit L Limits Amount of credit, Limit on credit. Extention Dollar, Dollar Limit Earned income, Earned Income Limit Reduced dollar, Tests To Claim the Credit, Reduced Dollar Limit Looking for work, Working or Looking for Work Losses, Net loss. Extention M Married and living apart, Married and living apart. Extention Meals and lodging for housekeeper, Meals and lodging provided for housekeeper. Extention Medical expenses, Medical expenses. Extention Minister, Clergy or church employee. Extention Missing children, photographs of, Reminders N Nonrefundability of credit, Tax credit not refundable. Extention Not able to care for self Qualifying person test, Physically or mentally not able to care for oneself. Extention Spouse, Qualifying Person Test, Rule for student-spouse or spouse not able to care for self. Extention , Working or Looking for Work, You or your spouse is a student or not able to care for self. Extention O Outside of home care, Care outside your home. Extention P Part of year Persons qualifying for, Person qualifying for part of year. Extention Work or looking for work, Work for part of year. Extention Part-time work, Part-time work. Extention Prepaid expenses, Expenses prepaid in an earlier year. Extention Prisoner, What is not earned income? Provider identification test, Tests To Claim the Credit, Provider Identification Test, Provider refusal. Extention Publications (see Tax help) Q Qualifying child, Qualifying child. Extention Qualifying person Care for, Care of a Qualifying Person Expenses not for care, Expenses not for care. Extention Qualifying person test, Qualifying Person Test, Child of divorced or separated parents or parents living apart. Extention Tests to claim credit, Tests To Claim the Credit R Recordkeeping requirements, How To Claim the Credit Reduced dollar limit, Reduced Dollar Limit Tests to claim credit, Tests To Claim the Credit Refusal by provider to give information, Provider refusal. Extention Reimbursed expenses, Expenses reimbursed. Extention Relatives, payments to, Tests To Claim the Credit, Payments to Relatives or Dependents Religious faiths opposed to social security programs, Members of certain religious faiths opposed to social security. Extention S School expenses, Education. Extention Self-employed persons, Self-employment earnings. Extention Separated parents, Child of divorced or separated parents or parents living apart. Extention , Legally separated. Extention Separated spouse, Separated spouse. Extention Sick days, Temporary absence from work. Extention Social Security, Employment Taxes for Household Employers (see also Employment taxes) Religious faiths opposed to, Members of certain religious faiths opposed to social security. Extention Social security numbers, Information needed. Extention Spouse Both spouses qualifying, Both spouses qualify. Extention Death of, Death of spouse. Extention Nonworking, earned income, Rule for student-spouse or spouse not able to care for self. Extention Not able to care for self, Qualifying Person Test, Rule for student-spouse or spouse not able to care for self. Extention , Working or Looking for Work, You or your spouse is a student or not able to care for self. Extention Qualifying person, Qualifying Person Test Separated, Separated spouse. Extention Student, Rule for student-spouse or spouse not able to care for self. Extention , You or your spouse is a student or not able to care for self. Extention Surviving, Surviving spouse. Extention Working, Spouse works. Extention Students Full-time, Full-time student. Extention Spouse, Rule for student-spouse or spouse not able to care for self. Extention , You or your spouse is a student or not able to care for self. Extention T Tax help, How To Get Tax Help Taxes on wages (see Employment taxes) Taxpayer identification number (TINs), Reminders, Taxpayer identification number. Extention Adoption, Adoption taxpayer identification number (ATIN). Extention Aliens, Individual taxpayer identification number (ITIN) for aliens. Extention Providers, Information needed. Extention Temporary absence, Temporary absence from work. Extention Tests to claim credit, Tests To Claim the Credit, Exclusion or deduction. Extention Determination, Tests To Claim the Credit Earned income, Earned Income Test Qualifying persons, Qualifying Person Test Work-related expenses, Work-Related Expense Test Transportation, Transportation. Extention TTY/TDD information, How To Get Tax Help U Unearned income, What is not earned income? V Vacation, Temporary absence from work. Extention Volunteer work, Volunteer work. Extention W Wages, taxes on (see Employment taxes) Withholding Federal income tax, Employment Taxes for Household Employers Work-related expense test, Work-Related Expense Test, Payments to Relatives or Dependents Partly work-related expenses, Expenses partly work-related. Extention Tests to claim credit, Tests To Claim the Credit Work-related expenses Earned income limit, Earned Income Limit Figuring of credit, Figuring Total Work-Related Expenses Medical, Medical expenses. Extention Paid following year, Expenses not paid until the following year. Extention , Payments for prior year's expenses. Extention , Worksheet A. Extention Worksheet for 2012 Expenses Paid in 2013 Partly work-related expenses, Expenses partly work-related. Extention Prepaid, Expenses prepaid in an earlier year. Extention Recordkeeping, How To Claim the Credit Reimbursed, Expenses reimbursed. Extention Worksheets 2012 expenses paid in 2013 (Worksheet A), Worksheet A. Extention Worksheet for 2012 Expenses Paid in 2013 Prev  Up     Home   More Online Publications
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The Extention

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