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Myfreetaxes com rochestercash Publication 514 - Additional Material Prev  Up  Next   Home   More Online Publications
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Understanding Your CP297C Notice

We levied you for unpaid taxes. You have the right to a Collection Due
Process hearing.


What you need to do

  • Read your notice carefully — it explains our actions.
  • Pay what you owe.
  • Make a payment plan if you can’t pay the full amount you owe.

You may want to...


Answers to Common Questions

What should I do if I disagree with the notice?
Request a Collection Due Process hearing.

Why should I request a Collection Due Process hearing?
You can appeal the levy and other disagreements you have at a Collection Due Process hearing.

How can I request a Collection Due Process hearing?
Complete and send us a Form 12153, Request for a Collection Due Process or Equivalent Hearing.

Why didn't you tell me about my rights before you levied me?
Federal contractors do not have the right to a pre-levy hearing. We've already sent you several notices about the amount you owe.

What happens if I can't pay what I owe?
You can request a payment plan if you can't pay the full amount you owe.

How can I make a payment plan?
Call us at the toll free number on the top right corner of your notice to talk about payment plans or learn more about them here.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about how to file electronically.


Understanding your notice

Reading your notice
Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

Notice CP297C, Page 1

Notice CP297C, Page 2

Notice CP297C, Page 3

Notice CP297C, Page 4

Notice CP297C, Page 5

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 

Page Last Reviewed or Updated: 27-Jan-2014

The Myfreetaxes Com Rochestercash

Myfreetaxes com rochestercash 11. Myfreetaxes com rochestercash   Casualties, Thefts, and Condemnations Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Casualties and TheftsDeductible losses. Myfreetaxes com rochestercash Nondeductible losses. Myfreetaxes com rochestercash Family pet. Myfreetaxes com rochestercash Progressive deterioration. Myfreetaxes com rochestercash Decline in market value of stock. Myfreetaxes com rochestercash Mislaid or lost property. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Related persons. Myfreetaxes com rochestercash Replacement Property Replacement Period How To Postpone Gain Disaster Area LossesWho is eligible. Myfreetaxes com rochestercash Covered disaster area. Myfreetaxes com rochestercash Reporting Gains and Losses Introduction This chapter explains the tax treatment of casualties, thefts, and condemnations. Myfreetaxes com rochestercash A casualty occurs when property is damaged, destroyed, or lost due to a sudden, unexpected, or unusual event. Myfreetaxes com rochestercash A theft occurs when property is stolen. Myfreetaxes com rochestercash A condemnation occurs when private property is legally taken for public use without the owner's consent. Myfreetaxes com rochestercash A casualty, theft, or condemnation may result in a deductible loss or taxable gain on your federal income tax return. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash For more information, see Postponing Gain , later. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Casualties and Thefts If your property is destroyed, damaged, or stolen, you may have a deductible loss. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Casualty. Myfreetaxes com rochestercash   A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Myfreetaxes com rochestercash A sudden event is one that is swift, not gradual or progressive. Myfreetaxes com rochestercash An unexpected event is one that is ordinarily unanticipated and unintended. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Deductible losses. Myfreetaxes com rochestercash   Deductible casualty losses can result from a number of different causes, including the following. Myfreetaxes com rochestercash Airplane crashes. Myfreetaxes com rochestercash Car, truck, or farm equipment accidents not resulting from your willful act or willful negligence. Myfreetaxes com rochestercash Earthquakes. Myfreetaxes com rochestercash Fires (but see Nondeductible losses next for exceptions). Myfreetaxes com rochestercash Floods. Myfreetaxes com rochestercash Freezing. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Lightning. Myfreetaxes com rochestercash Storms, including hurricanes and tornadoes. Myfreetaxes com rochestercash Terrorist attacks. Myfreetaxes com rochestercash Vandalism. Myfreetaxes com rochestercash Volcanic eruptions. Myfreetaxes com rochestercash Nondeductible losses. Myfreetaxes com rochestercash   A casualty loss is not deductible if the damage or destruction is caused by the following. Myfreetaxes com rochestercash Accidentally breaking articles such as glassware or china under normal conditions. Myfreetaxes com rochestercash A family pet (explained below). Myfreetaxes com rochestercash A fire if you willfully set it, or pay someone else to set it. Myfreetaxes com rochestercash A car, truck, or farm equipment accident if your willful negligence or willful act caused it. Myfreetaxes com rochestercash The same is true if the willful act or willful negligence of someone acting for you caused the accident. Myfreetaxes com rochestercash Progressive deterioration (explained below). Myfreetaxes com rochestercash Family pet. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Example. Myfreetaxes com rochestercash You keep your horse in your yard. Myfreetaxes com rochestercash The ornamental fruit trees in your yard were damaged when your horse stripped the bark from them. Myfreetaxes com rochestercash Some of the trees were completely girdled and died. Myfreetaxes com rochestercash Because the damage was not unexpected or unusual, the loss is not deductible. Myfreetaxes com rochestercash Progressive deterioration. Myfreetaxes com rochestercash   Loss of property due to progressive deterioration is not deductible as a casualty loss. Myfreetaxes com rochestercash This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Myfreetaxes com rochestercash Examples of damage due to progressive deterioration include damage from rust, corrosion, or termites. Myfreetaxes com rochestercash However, weather-related conditions or disease may cause another type of involuntary conversion. Myfreetaxes com rochestercash See Other Involuntary Conversions , later. Myfreetaxes com rochestercash Theft. Myfreetaxes com rochestercash   A theft is the taking and removing of money or property with the intent to deprive the owner of it. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash You do not need to show a conviction for theft. Myfreetaxes com rochestercash   Theft includes the taking of money or property by the following means: Blackmail, Burglary, Embezzlement, Extortion, Kidnapping for ransom, Larceny, Robbery, or Threats. Myfreetaxes com rochestercash The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Myfreetaxes com rochestercash Decline in market value of stock. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash You report a capital loss on Schedule D (Form 1040). Myfreetaxes com rochestercash For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Myfreetaxes com rochestercash Mislaid or lost property. Myfreetaxes com rochestercash   The simple disappearance of money or property is not a theft. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Example. Myfreetaxes com rochestercash A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Myfreetaxes com rochestercash The diamond falls from the ring and is never found. Myfreetaxes com rochestercash The loss of the diamond is a casualty. Myfreetaxes com rochestercash Farming Losses You can deduct certain casualty or theft losses that occur in the business of farming. Myfreetaxes com rochestercash The following is a discussion of some losses you can deduct and some you cannot deduct. Myfreetaxes com rochestercash Livestock or produce bought for resale. Myfreetaxes com rochestercash   Casualty or theft losses of livestock or produce bought for resale are deductible if you report your income on the cash method. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash You cannot take a separate deduction. Myfreetaxes com rochestercash Livestock, plants, produce, and crops raised for sale. Myfreetaxes com rochestercash   Losses of livestock, plants, produce, and crops raised for sale are generally not deductible if you report your income on the cash method. Myfreetaxes com rochestercash You have already deducted the cost of raising these items as farm expenses, so their basis is equal to zero. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash You usually have a tax basis if you capitalized the expenses associated with these plants under the uniform capitalization rules. Myfreetaxes com rochestercash The uniform capitalization rules are discussed in chapter 6. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash You get the deduction by omitting the item from your inventory at the close of your tax year. Myfreetaxes com rochestercash You cannot take a separate casualty or theft deduction. Myfreetaxes com rochestercash Income loss. Myfreetaxes com rochestercash   A loss of future income is not deductible. Myfreetaxes com rochestercash Example. Myfreetaxes com rochestercash A severe flood destroyed your crops. Myfreetaxes com rochestercash 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 . Myfreetaxes com rochestercash You estimate that the crop loss will reduce your farm income by $25,000. Myfreetaxes com rochestercash This loss of future income is also not deductible. Myfreetaxes com rochestercash Loss of timber. Myfreetaxes com rochestercash   If you sell timber downed as a result of a casualty, treat the proceeds from the sale as a reimbursement. Myfreetaxes com rochestercash If you use the proceeds to buy qualified replacement property, you can postpone reporting the gain. Myfreetaxes com rochestercash See Postponing Gain , later. Myfreetaxes com rochestercash Property used in farming. Myfreetaxes com rochestercash   Casualty and theft losses of property used in your farm business usually result in deductible losses. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash See How To Figure a Loss , later. Myfreetaxes com rochestercash Raised draft, breeding, dairy, or sporting animals. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash You use inventories to determine your income and you included the animals in your inventory. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash When you include livestock in inventory, its last inventory value is its basis. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash You cannot take a separate deduction. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Farm property. Myfreetaxes com rochestercash   Farm property is the property you use in your farming business. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash   If your farm property was partially damaged, use the steps shown under Personal-use property next to figure your casualty loss. Myfreetaxes com rochestercash However, the deduction limits, discussed later, do not apply to farm property. Myfreetaxes com rochestercash Personal-use property. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash The following items are examples of personal-use property: Your main home. Myfreetaxes com rochestercash Furniture and electronics used in your main home and not used in a home office or for business purposes. Myfreetaxes com rochestercash Clothing and jewelry. Myfreetaxes com rochestercash An automobile used for nonbusiness purposes. Myfreetaxes com rochestercash You figure the casualty or theft loss on this property by taking the following steps. Myfreetaxes com rochestercash Determine your adjusted basis in the property before the casualty or theft. Myfreetaxes com rochestercash Determine the decrease in fair market value of the property as a result of the casualty or theft. Myfreetaxes com rochestercash From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you receive or expect to receive. Myfreetaxes com rochestercash You must apply the deduction limits, discussed later, to determine your deductible loss. Myfreetaxes com rochestercash    You can use Publication 584 to list your stolen or damaged personal-use property and figure your loss. Myfreetaxes com rochestercash It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. Myfreetaxes com rochestercash Adjusted basis. Myfreetaxes com rochestercash   Adjusted basis is your basis (usually cost) increased or decreased by various events, such as improvements and casualty losses. Myfreetaxes com rochestercash For more information about adjusted basis, see chapter 6. Myfreetaxes com rochestercash Decrease in fair market value (FMV). Myfreetaxes com rochestercash   The decrease in FMV is the difference between the property's value immediately before the casualty or theft and its value immediately afterward. Myfreetaxes com rochestercash FMV is defined in chapter 10 under Payments Received or Considered Received . Myfreetaxes com rochestercash Appraisal. Myfreetaxes com rochestercash   To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. Myfreetaxes com rochestercash But other measures, such as the cost of cleaning up or making repairs (discussed next) can be used to establish decreases in FMV. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Myfreetaxes com rochestercash This information is needed to limit any deduction to the actual loss resulting from damage to the property. Myfreetaxes com rochestercash Cost of cleaning up or making repairs. Myfreetaxes com rochestercash   The cost of cleaning up after a casualty is not part of a casualty loss. Myfreetaxes com rochestercash Neither is the cost of repairing damaged property after a casualty. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash The repairs are actually made. Myfreetaxes com rochestercash The repairs are necessary to bring the property back to its condition before the casualty. Myfreetaxes com rochestercash The amount spent for repairs is not excessive. Myfreetaxes com rochestercash The repairs fix the damage only. Myfreetaxes com rochestercash The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Myfreetaxes com rochestercash Related expenses. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash However, they may be deductible as farm business expenses if the damaged or stolen property is farm property. Myfreetaxes com rochestercash Separate computations for more than one item of property. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Then combine the losses to determine your total loss. Myfreetaxes com rochestercash    There is an exception to this rule for personal-use real property. Myfreetaxes com rochestercash See Exception for personal-use real property, later. Myfreetaxes com rochestercash Example. Myfreetaxes com rochestercash A fire on your farm damaged a tractor and the barn in which it was stored. Myfreetaxes com rochestercash The tractor had an adjusted basis of $3,300. Myfreetaxes com rochestercash Its FMV was $28,000 just before the fire and $10,000 immediately afterward. Myfreetaxes com rochestercash The barn had an adjusted basis of $28,000. Myfreetaxes com rochestercash Its FMV was $55,000 just before the fire and $25,000 immediately afterward. Myfreetaxes com rochestercash You received insurance reimbursements of $2,100 on the tractor and $26,000 on the barn. Myfreetaxes com rochestercash Figure your deductible casualty loss separately for the two items of property. Myfreetaxes com rochestercash     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. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Figure the loss using the smaller of the following. Myfreetaxes com rochestercash The decrease in FMV of the entire property. Myfreetaxes com rochestercash The adjusted basis of the entire property. Myfreetaxes com rochestercash Example. Myfreetaxes com rochestercash You bought a farm in 1990 for $160,000. Myfreetaxes com rochestercash The adjusted basis of the residential part is now $128,000. Myfreetaxes com rochestercash In 2013, a windstorm blew down shade trees and three ornamental trees planted at a cost of $7,500 on the residential part. Myfreetaxes com rochestercash The adjusted basis of the residential part includes the $7,500. Myfreetaxes com rochestercash The fair market value (FMV) of the residential part immediately before the storm was $400,000, and $385,000 immediately after the storm. Myfreetaxes com rochestercash The trees were not covered by insurance. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash   If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Myfreetaxes com rochestercash You do not have a casualty or theft loss to the extent you are reimbursed. Myfreetaxes com rochestercash   If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Myfreetaxes com rochestercash You must reduce your loss even if you do not receive payment until a later tax year. Myfreetaxes com rochestercash    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. Myfreetaxes com rochestercash You may have to include a portion of these payments in your income. Myfreetaxes com rochestercash See Insurance payments for living expenses in Publication 547 for details. Myfreetaxes com rochestercash Disaster relief. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Excludable cash gifts you receive also do not reduce your casualty loss if there are no limits on how you can use the money. Myfreetaxes com rochestercash   Generally, disaster relief grants received under the Robert T. Myfreetaxes com rochestercash Stafford Disaster Relief and Emergency Assistance Act are not included in your income. Myfreetaxes com rochestercash See Federal disaster relief grants , later, under Disaster Area Losses . Myfreetaxes com rochestercash   Qualified disaster relief payments for expenses you incurred as a result of a federally declared disaster are not taxable income to you. Myfreetaxes com rochestercash See Qualified disaster relief payments , later, under Disaster Area Losses . Myfreetaxes com rochestercash Reimbursement received after deducting loss. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Actual reimbursement less than expected. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Actual reimbursement more than expected. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Do not refigure your tax for the year you claimed the deduction. Myfreetaxes com rochestercash See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Actual reimbursement same as expected. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Lump-sum reimbursement. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Figure the gain or loss separately for each asset that has a separate basis. Myfreetaxes com rochestercash Adjustments to basis. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash The result is your adjusted basis in the property. Myfreetaxes com rochestercash Amounts you spend on repairs to restore your property to its pre-casualty condition increase your adjusted basis. Myfreetaxes com rochestercash See Adjusted Basis in chapter 6 for more information. Myfreetaxes com rochestercash Example. Myfreetaxes com rochestercash You built a new silo for $25,000. Myfreetaxes com rochestercash This is the basis in your silo because that is the total cost you incurred to build it. Myfreetaxes com rochestercash During the year, a tornado damaged your silo and your allowable casualty loss deduction was $1,000. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Your adjusted basis in the silo after the casualty is $26,000 ($25,000 - $1,000 - $4,000 + $6,000). Myfreetaxes com rochestercash 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). Myfreetaxes com rochestercash There are two limits on the deduction for casualty or theft loss of personal-use property. Myfreetaxes com rochestercash You figure these limits on Form 4684. Myfreetaxes com rochestercash $100 rule. Myfreetaxes com rochestercash   You must reduce each casualty or theft loss on personal-use property by $100. Myfreetaxes com rochestercash This rule applies after you have subtracted any reimbursement. Myfreetaxes com rochestercash 10% rule. Myfreetaxes com rochestercash   You must further reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. Myfreetaxes com rochestercash Apply this rule after you reduce each loss by $100. Myfreetaxes com rochestercash Adjusted gross income is on line 38 of Form 1040. Myfreetaxes com rochestercash Example. Myfreetaxes com rochestercash In June, you discovered that your house had been burglarized. Myfreetaxes com rochestercash Your loss after insurance reimbursement was $2,000. Myfreetaxes com rochestercash Your adjusted gross income for the year you discovered the burglary is $57,000. Myfreetaxes com rochestercash Figure your theft loss deduction as follows: 1. Myfreetaxes com rochestercash Loss after insurance $2,000 2. Myfreetaxes com rochestercash Subtract $100 100 3. Myfreetaxes com rochestercash Loss after $100 rule $1,900 4. Myfreetaxes com rochestercash Subtract 10% (. Myfreetaxes com rochestercash 10) × $57,000 AGI $5,700 5. Myfreetaxes com rochestercash 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). Myfreetaxes com rochestercash    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. Myfreetaxes com rochestercash See 10% Rule in Publication 547. Myfreetaxes com rochestercash When Loss Is Deductible Generally, you can deduct casualty losses that are not reimbursable only in the tax year in which they occur. Myfreetaxes com rochestercash You generally can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. Myfreetaxes com rochestercash However, losses in federally declared disaster areas are subject to different rules. Myfreetaxes com rochestercash See Disaster Area Losses , later, for an exception. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Leased property. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash This is true even if the loss occurred or the liability was paid in a different year. Myfreetaxes com rochestercash You are not entitled to a deduction until your liability under the lease can be determined with reasonable accuracy. Myfreetaxes com rochestercash Your liability can be determined when a claim for recovery is settled, adjudicated, or abandoned. Myfreetaxes com rochestercash Example. Myfreetaxes com rochestercash Robert leased a tractor from First Implement, Inc. Myfreetaxes com rochestercash , for use in his farm business. Myfreetaxes com rochestercash The tractor was destroyed by a tornado in June 2012. Myfreetaxes com rochestercash The loss was not insured. Myfreetaxes com rochestercash First Implement billed Robert for the fair market value of the tractor on the date of the loss. Myfreetaxes com rochestercash Robert disagreed with the bill and refused to pay it. Myfreetaxes com rochestercash First Implement later filed suit in court against Robert. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Robert paid $20,000 in June 2013. Myfreetaxes com rochestercash He can claim the $20,000 as a loss on his 2013 tax return. Myfreetaxes com rochestercash Net operating loss (NOL). Myfreetaxes com rochestercash   If your deductions, including casualty or theft loss deductions, are more than your income for the year, you may have an NOL. Myfreetaxes com rochestercash An NOL can be carried back or carried forward and deducted from income in other years. Myfreetaxes com rochestercash See Publication 536 for more information on NOLs. Myfreetaxes com rochestercash Proof of Loss To deduct a casualty or theft loss, you must be able to prove that there was a casualty or theft. Myfreetaxes com rochestercash You must have records to support the amount you claim for the loss. Myfreetaxes com rochestercash Casualty loss proof. Myfreetaxes com rochestercash   For a casualty loss, your records should show all the following information. Myfreetaxes com rochestercash The type of casualty (car accident, fire, storm, etc. Myfreetaxes com rochestercash ) and when it occurred. Myfreetaxes com rochestercash That the loss was a direct result of the casualty. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Myfreetaxes com rochestercash Theft loss proof. Myfreetaxes com rochestercash   For a theft loss, your records should show all the following information. Myfreetaxes com rochestercash When you discovered your property was missing. Myfreetaxes com rochestercash That your property was stolen. Myfreetaxes com rochestercash That you were the owner of the property. Myfreetaxes com rochestercash Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Myfreetaxes com rochestercash Figuring a Gain A casualty or theft may result in a taxable gain. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash You generally report your gain as income in the year you receive the reimbursement. Myfreetaxes com rochestercash However, depending on the type of property you receive, you may not have to report your gain. Myfreetaxes com rochestercash See Postponing Gain , later. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Amount you receive. Myfreetaxes com rochestercash   The amount you receive includes any money plus the value of any property you receive, minus any expenses you have in obtaining reimbursement. Myfreetaxes com rochestercash It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. Myfreetaxes com rochestercash Example. Myfreetaxes com rochestercash A tornado severely damaged your barn. Myfreetaxes com rochestercash The adjusted basis of the barn was $25,000. Myfreetaxes com rochestercash Your insurance company reimbursed you $40,000 for the damaged barn. Myfreetaxes com rochestercash However, you had legal expenses of $2,000 to collect that insurance. Myfreetaxes com rochestercash Your insurance minus your expenses to collect the insurance is more than your adjusted basis in the barn, so you have a gain. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Some of these are discussed in the following paragraphs. Myfreetaxes com rochestercash Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes. Myfreetaxes com rochestercash You report the gain or deduct the loss on your tax return for the year you realize it. Myfreetaxes com rochestercash However, depending on the type of property you receive, you may not have to report your gain on the involuntary conversion. Myfreetaxes com rochestercash See Postponing Gain , later. Myfreetaxes com rochestercash Condemnation Condemnation is the process by which private property is legally taken for public use without the owner's consent. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash The owner receives a condemnation award (money or property) in exchange for the property taken. Myfreetaxes com rochestercash A condemnation is a forced sale, the owner being the seller and the condemning authority being the buyer. Myfreetaxes com rochestercash Threat of condemnation. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Main home condemned. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash For information on this exclusion, see Publication 523. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash See Postponing Gain , later. Myfreetaxes com rochestercash (You cannot deduct a loss from the condemnation of your main home. Myfreetaxes com rochestercash ) More information. Myfreetaxes com rochestercash   For information on how to figure the gain or loss on condemned property, see chapter 1 in Publication 544. Myfreetaxes com rochestercash Also see Postponing Gain , later, to find out if you can postpone reporting the gain. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Livestock Losses Diseased livestock. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash If the livestock were raised or purchased for resale, follow the rules for livestock discussed earlier under Farming Losses . Myfreetaxes com rochestercash Otherwise, figure the gain or loss from these conversions using the rules discussed under Determining Gain or Loss in chapter 8. Myfreetaxes com rochestercash If you replace the livestock, you may be able to postpone reporting the gain. Myfreetaxes com rochestercash See Postponing Gain below. Myfreetaxes com rochestercash Reporting dispositions of diseased livestock. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash You must also include other information on this statement. Myfreetaxes com rochestercash See How To Postpone Gain , later, under Postponing Gain . Myfreetaxes com rochestercash Weather-related sales of livestock. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Figure the gain or loss using the rules discussed under Determining Gain or Loss in chapter 8. Myfreetaxes com rochestercash If you replace the livestock, you may be able to postpone reporting the gain. Myfreetaxes com rochestercash See Postponing Gain below. Myfreetaxes com rochestercash Example. Myfreetaxes com rochestercash It is your usual business practice to sell five of your dairy animals during the year. Myfreetaxes com rochestercash This year you sold 20 dairy animals because of drought. Myfreetaxes com rochestercash The sale of 15 animals is treated as an involuntary conversion. Myfreetaxes com rochestercash    If you do not replace the livestock, you may be able to report the gain in the following year's income. Myfreetaxes com rochestercash This rule also applies to other livestock (including poultry). Myfreetaxes com rochestercash See Sales Caused by Weather-Related Conditions in chapter 3. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Treat the loss as a loss from an involuntary conversion. Myfreetaxes com rochestercash The loss equals the previously capitalized reforestation costs you had to duplicate on replanting. Myfreetaxes com rochestercash You deduct the loss on the return for the year the seedlings died. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Your basis in the new property is generally the same as your adjusted basis in the property it replaces. Myfreetaxes com rochestercash You must ordinarily report the gain on your stolen, destroyed, or other involuntarily converted property if you receive money or unlike property as reimbursement. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. Myfreetaxes com rochestercash To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Example 1. Myfreetaxes com rochestercash In 1985, you constructed a barn to store farm equipment at a cost of $20,000. Myfreetaxes com rochestercash In 1987, you added a silo to the barn at a cost of $15,000 to store grain. Myfreetaxes com rochestercash In May of this year, the property was worth $100,000. Myfreetaxes com rochestercash In June the barn and silo were destroyed by a tornado. Myfreetaxes com rochestercash At the time of the tornado, you had an adjusted basis of $0 in the property. Myfreetaxes com rochestercash You received $85,000 from the insurance company. Myfreetaxes com rochestercash You had a gain of $85,000 ($85,000 – $0). Myfreetaxes com rochestercash You spent $80,000 to rebuild the barn and silo. Myfreetaxes com rochestercash Since this is less than the insurance proceeds received, you must include $5,000 ($85,000 – $80,000) in your income. Myfreetaxes com rochestercash Example 2. Myfreetaxes com rochestercash In 1970, you bought a cabin in the mountains for your personal use at a cost of $18,000. Myfreetaxes com rochestercash You made no further improvements or additions to it. Myfreetaxes com rochestercash When a storm destroyed the cabin this January, the cabin was worth $250,000. Myfreetaxes com rochestercash You received $146,000 from the insurance company in March. Myfreetaxes com rochestercash You had a gain of $128,000 ($146,000 − $18,000). Myfreetaxes com rochestercash You spent $144,000 to rebuild the cabin. Myfreetaxes com rochestercash Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. Myfreetaxes com rochestercash Buying replacement property from a related person. Myfreetaxes com rochestercash   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). Myfreetaxes com rochestercash This rule applies to the following taxpayers. Myfreetaxes com rochestercash C corporations. Myfreetaxes com rochestercash Partnerships in which more than 50% of the capital or profits interest is owned by C corporations. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Myfreetaxes com rochestercash If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Myfreetaxes com rochestercash Exception. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Related persons. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Myfreetaxes com rochestercash Death of a taxpayer. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Replacement Property You must buy replacement property for the specific purpose of replacing your property. Myfreetaxes com rochestercash Your replacement property must be similar or related in service or use to the property it replaces. Myfreetaxes com rochestercash You do not have to use the same funds you receive as reimbursement for your old property to acquire the replacement property. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Property you acquire by gift or inheritance does not qualify as replacement property. Myfreetaxes com rochestercash Owner-user. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash A grinding mill that replaces a tractor does not qualify. Myfreetaxes com rochestercash Neither does a breeding or draft animal that replaces a dairy cow. Myfreetaxes com rochestercash Soil or other environmental contamination. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Weather-related conditions. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Example. Myfreetaxes com rochestercash Each year you normally sell 25 cows from your beef herd. Myfreetaxes com rochestercash However, this year you had to sell 50 cows. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Standing crop destroyed by casualty. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash 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). Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Timber loss. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash If you bought the standing timber within the replacement period, you can postpone reporting the gain. Myfreetaxes com rochestercash Business or income-producing property located in a federally declared disaster area. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash For more information, see Disaster Area Losses in Publication 547. Myfreetaxes com rochestercash Substituting replacement property. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash This is true even if you acquire the other property within the replacement period. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Basis of replacement property. Myfreetaxes com rochestercash   You must reduce the basis of your replacement property (its cost) by the amount of postponed gain. Myfreetaxes com rochestercash In this way, tax on the gain is postponed until you dispose of the replacement property. Myfreetaxes com rochestercash Replacement Period To postpone reporting your gain, you must buy replacement property within a specified period of time. Myfreetaxes com rochestercash This is the replacement period. Myfreetaxes com rochestercash The replacement period begins on the date your property was damaged, destroyed, stolen, sold, or exchanged. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Example. Myfreetaxes com rochestercash You are a calendar year taxpayer. Myfreetaxes com rochestercash While you were on vacation, farm equipment that cost $2,200 was stolen from your farm. Myfreetaxes com rochestercash You discovered the theft when you returned to your farm on November 11, 2012. Myfreetaxes com rochestercash Your insurance company investigated the theft and did not settle your claim until January 5, 2013, when they paid you $3,000. Myfreetaxes com rochestercash You first realized a gain from the reimbursement for the theft during 2013, so you have until December 31, 2015, to replace the property. Myfreetaxes com rochestercash Main home in disaster area. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash See Disaster Area Losses , later. Myfreetaxes com rochestercash Property in the Midwestern disaster areas. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Midwestern disaster areas. Myfreetaxes com rochestercash Property in the Kansas disaster area. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Kansas disaster area. Myfreetaxes com rochestercash Property in the Hurricane Katrina disaster area. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Myfreetaxes com rochestercash Weather-related sales of livestock in an area eligible for federal assistance. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash The IRS may extend the replacement period on a regional basis if the weather-related conditions continue for longer than 3 years. Myfreetaxes com rochestercash   For information on extensions of the replacement period because of persistent drought, see Notice 2006-82, 2006-39 I. Myfreetaxes com rochestercash R. Myfreetaxes com rochestercash B. Myfreetaxes com rochestercash 529, available at  www. Myfreetaxes com rochestercash irs. Myfreetaxes com rochestercash gov/irb/2006-39_IRB/ar11. Myfreetaxes com rochestercash html. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash gov. Myfreetaxes com rochestercash Condemnation. Myfreetaxes com rochestercash   The replacement period for a condemnation begins on the earlier of the following dates. Myfreetaxes com rochestercash The date on which you disposed of the condemned property. Myfreetaxes com rochestercash The date on which the threat of condemnation began. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Business or investment real property. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Extension. Myfreetaxes com rochestercash   You can apply for an extension of the replacement period. Myfreetaxes com rochestercash Send your written application to the Internal Revenue Service Center where you file your tax return. Myfreetaxes com rochestercash See your tax return instructions for the address. Myfreetaxes com rochestercash Include all the details about your need for an extension. Myfreetaxes com rochestercash Make your application before the end of the replacement period. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash You will get an extension of the replacement period if you can show reasonable cause for not making the replacement within the regular period. Myfreetaxes com rochestercash How To Postpone Gain You postpone reporting your gain by reporting your choice on your tax return for the year you have the gain. Myfreetaxes com rochestercash You have the gain in the year you receive insurance proceeds or other reimbursements that result in a gain. Myfreetaxes com rochestercash Required statement. Myfreetaxes com rochestercash   You should attach a statement to your return for the year you have the gain. Myfreetaxes com rochestercash This statement should include all the following information. Myfreetaxes com rochestercash The date and details of the casualty, theft, or other involuntary conversion. Myfreetaxes com rochestercash The insurance or other reimbursement you received. Myfreetaxes com rochestercash How you figured the gain. Myfreetaxes com rochestercash Replacement property acquired before return filed. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash The replacement property. Myfreetaxes com rochestercash The postponed gain. Myfreetaxes com rochestercash The basis adjustment that reflects the postponed gain. Myfreetaxes com rochestercash Any gain you are reporting as income. Myfreetaxes com rochestercash Replacement property acquired after return filed. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash   You should then attach another statement to your return for the year in which you buy the replacement property. Myfreetaxes com rochestercash This statement should contain detailed information on the replacement property. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Include in the statement detailed information on the replacement property bought in that year. Myfreetaxes com rochestercash Reporting weather-related sales of livestock. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Evidence of the weather-related conditions that forced the sale or exchange of the livestock. Myfreetaxes com rochestercash The gain realized on the sale or exchange. Myfreetaxes com rochestercash The number and kind of livestock sold or exchanged. Myfreetaxes com rochestercash The number of livestock of each kind you would have sold or exchanged under your usual business practice. Myfreetaxes com rochestercash   Show all the following information and the preceding information on the return for the year in which you replace the livestock. Myfreetaxes com rochestercash The dates you bought the replacement property. Myfreetaxes com rochestercash The cost of the replacement property. Myfreetaxes com rochestercash Description of the replacement property (for example, the number and kind of the replacement livestock). Myfreetaxes com rochestercash Amended return. Myfreetaxes com rochestercash   You must file an amended return (Form 1040X) for the tax year of the gain in either of the following situations. Myfreetaxes com rochestercash You do not acquire replacement property within the replacement period, plus extensions. Myfreetaxes com rochestercash On this amended return, you must report the gain and pay any additional tax due. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash On this amended return, you must report the part of the gain that cannot be postponed and pay any additional tax due. Myfreetaxes com rochestercash Disaster Area Losses Special rules apply to federally declared disaster area losses. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Stafford Disaster Relief and Emergency Assistance Act. Myfreetaxes com rochestercash It includes a major disaster or emergency declaration under the act. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash fema. Myfreetaxes com rochestercash gov. Myfreetaxes com rochestercash This part discusses the special rules for when to deduct a disaster area loss and what tax deadlines may be postponed. Myfreetaxes com rochestercash For other special rules, see Disaster Area Losses in Publication 547. Myfreetaxes com rochestercash When to deduct the loss. Myfreetaxes com rochestercash   You generally must deduct a casualty loss in the year it occurred. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash If you make this choice, the loss is treated as having occurred in the preceding year. Myfreetaxes com rochestercash    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. Myfreetaxes com rochestercash   You must make the choice to take your casualty loss for the disaster in the preceding year by the later of the following dates. Myfreetaxes com rochestercash The due date (without extensions) for filing your tax return for the tax year in which the disaster actually occurred. Myfreetaxes com rochestercash The due date (with extensions) for the return for the preceding tax year. Myfreetaxes com rochestercash Federal disaster relief grants. Myfreetaxes com rochestercash   Do not include post-disaster relief grants received under the Robert T. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Do not deduct casualty losses or medical expenses to the extent they are specifically reimbursed by these disaster relief grants. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Unemployment assistance payments under the Act are taxable unemployment compensation. Myfreetaxes com rochestercash Qualified disaster relief payments. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Myfreetaxes com rochestercash No withholding applies to these payments. Myfreetaxes com rochestercash   Qualified disaster relief payments include payments you receive (regardless of the source) for the following expenses. Myfreetaxes com rochestercash Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a federally declared disaster. Myfreetaxes com rochestercash Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a federally declared disaster. Myfreetaxes com rochestercash (A personal residence can be a rented residence or one you own. Myfreetaxes com rochestercash ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a federally declared disaster. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash    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. Myfreetaxes com rochestercash Qualified disaster mitigation payments. Myfreetaxes com rochestercash   Qualified disaster mitigation payments made under the Robert T. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash These are payments you, as a property owner, receive to reduce the risk of future damage to your property. Myfreetaxes com rochestercash You cannot increase your basis in property, or take a deduction or credit, for expenditures made with respect to those payments. Myfreetaxes com rochestercash Sale of property under hazard mitigation program. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash You report the gain or deduct the loss on your tax return for the year you realize it. Myfreetaxes com rochestercash (You cannot deduct a loss on personal-use property unless the loss resulted from a casualty, as discussed earlier. Myfreetaxes com rochestercash ) 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. Myfreetaxes com rochestercash See Postponing Gain , earlier, for the rules that apply. Myfreetaxes com rochestercash Other federal assistance programs. Myfreetaxes com rochestercash    For more information about other federal assistance programs, see Crop Insurance and Crop Disaster Payments and Feed Assistance and Payments in chapter 3 earlier. Myfreetaxes com rochestercash Postponed tax deadlines. Myfreetaxes com rochestercash   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash   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). Myfreetaxes com rochestercash Go to http://www. Myfreetaxes com rochestercash irs. Myfreetaxes com rochestercash gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. Myfreetaxes com rochestercash Who is eligible. Myfreetaxes com rochestercash   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Myfreetaxes com rochestercash Any individual whose main home is located in a covered disaster area (defined next). Myfreetaxes com rochestercash Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. Myfreetaxes com rochestercash Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered disaster area. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash The main home or principal place of business does not have to be located in the covered disaster area. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash The spouse on a joint return with a taxpayer who is eligible for postponements. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. Myfreetaxes com rochestercash Any other person determined by the IRS to be affected by a federally declared disaster. Myfreetaxes com rochestercash Covered disaster area. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Abatement of interest and penalties. Myfreetaxes com rochestercash   The IRS may abate the interest and penalties on the underpaid income tax for the length of any postponement of tax deadlines. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Form 4684. Myfreetaxes com rochestercash   Use this form to report your gains and losses from casualties and thefts. Myfreetaxes com rochestercash Form 4797. Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash 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. Myfreetaxes com rochestercash Form 8949. Myfreetaxes com rochestercash   Use this form to report gain from an involuntary conversion (other than from casualty or theft) of personal-use property. Myfreetaxes com rochestercash Schedule A (Form 1040). Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Schedule D (Form 1040). Myfreetaxes com rochestercash   Use this form to carry over the following gains. Myfreetaxes com rochestercash Net gain shown on Form 4797 from an involuntary conversion of business property held for more than 1 year. Myfreetaxes com rochestercash Net gain shown on Form 4684 from the casualty or theft of personal-use property. Myfreetaxes com rochestercash    Also use this form to figure the overall gain or loss from transactions reported on Form 8949. Myfreetaxes com rochestercash Schedule F (Form 1040). Myfreetaxes com rochestercash   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. Myfreetaxes com rochestercash Prev  Up  Next   Home   More Online Publications