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File back taxes Publication 3402 - Introductory Material Table of Contents Reminder IntroductionOrdering forms and publications. File back taxes Tax questions. File back taxes Useful Items - You may want to see: Reminder Photographs of missing children. File back taxes  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. File back taxes Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. File back taxes You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. File back taxes Introduction This publication provides federal income, employment, and excise tax information for limited liability companies. File back taxes This publication does not address state law governing the formation, operation, or termination of limited liability companies. File back taxes This publication does not address any state taxes. File back taxes Comments and suggestions. File back taxes   We welcome your comments about this publication and your suggestions for future editions. File back taxes   You can write to us at the following address: Internal Revenue Service Business Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. File back taxes NW, IR–6526 Washington, DC 20224   We respond to many letters by telephone. File back taxes Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. File back taxes   You can email us at *taxforms@irs. File back taxes gov. File back taxes (The asterisk must be included in the address. File back taxes ) Please put “Publications Comment” on the subject line. File back taxes Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products. File back taxes Ordering forms and publications. File back taxes   Visit www. File back taxes irs. File back taxes gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. File back taxes Internal Revenue Service1201 N. File back taxes Mitsubishi MotorwayBloomington, IL 61705-6613 Tax questions. File back taxes   If you have a tax question, check the information available on www. File back taxes irs. File back taxes gov or call 1-800-829-1040. File back taxes We cannot answer tax questions sent to either of the above addresses. File back taxes Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 334 Tax Guide for Small Business 505 Tax Withholding and Estimated Tax 535 Business Expenses 541 Partnerships 542 Corporations 544 Sales and Other Dispositions of Assets 583 Starting a Business and Keeping Records 925 Passive Activity and At-Risk Rules Form (and Instructions) 1065 U. File back taxes S. File back taxes Return of Partnership Income 1120 U. File back taxes S. File back taxes Corporation Income Tax Return 1120S U. File back taxes S. File back taxes Income Tax Return for an S Corporation 2553 Election by a Small Business Corporation 8832 Entity Classification Election See How To Get More Information near the end of this publication for information about getting publications and forms. File back taxes Prev  Up  Next   Home   More Online Publications
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File back taxes 25. File back taxes   Nonbusiness Casualty and Theft Losses Table of Contents What's New Introduction Useful Items - You may want to see: CasualtyFamily pet. File back taxes Progressive deterioration. File back taxes Damage from corrosive drywall. File back taxes Theft Loss on Deposits Proof of Loss Figuring a LossDecrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Single Casualty on Multiple Properties Deduction Limits$100 Rule 10% Rule When To Report Gains and LossesDisaster Area Loss How To Report Gains and Losses What's New New Section C of Form 4684 for Ponzi-type investment schemes. File back taxes  Section C of Form 4684 is new for 2013. File back taxes You must complete Section C if you are claiming a theft loss deduction due to a Ponzi-type investment scheme and are using Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58. File back taxes Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. File back taxes You do not need to complete Appendix A. File back taxes For details, see Losses from Ponzi-type investment schemes , in this chapter. File back taxes Introduction This chapter explains the tax treatment of personal (not business or investment related) casualty losses, theft losses, and losses on deposits. File back taxes The chapter also explains the following  topics. File back taxes How to figure the amount of your loss. File back taxes How to treat insurance and other reimbursements you receive. File back taxes The deduction limits. File back taxes When and how to report a casualty or theft. File back taxes Forms to file. File back taxes    When you have a casualty or theft, you have to file Form 4684. File back taxes You will also have to file one or more of the following forms. File back taxes Schedule A (Form 1040), Itemized Deductions Schedule D (Form 1040), Capital Gains and Losses Condemnations. File back taxes   For information on condemnations of property, see Involuntary Conversions in chapter 1 of Publication 544, Sales and Other Disposition of Assets. File back taxes Workbook for casualties and thefts. File back taxes    Publication 584 is available to help you make a list of your stolen or damaged personal-use property and figure your loss. File back taxes It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. File back taxes Business or investment-related losses. File back taxes   For information on a casualty or theft loss of business or income-producing property, see Publication 547, Casualties, Disasters, and Thefts. File back taxes Useful Items - You may want to see: Publication 544 Sales and Other Dispositions  of Assets 547 Casualties, Disasters, and   Thefts 584 Casualty, Disaster, and Theft   Loss Workbook (Personal-Use  Property) Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule D (Form 1040) Capital Gains and Losses 4684 Casualties and Thefts Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. File back taxes A sudden event is one that is swift, not gradual or progressive. File back taxes An unexpected event is one that is ordinarily unanticipated and unintended. File back taxes 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. File back taxes Deductible losses. File back taxes   Deductible casualty losses can result from a number of different causes, including the following. File back taxes Car accidents (but see Nondeductible losses , next, for exceptions). File back taxes Earthquakes. File back taxes Fires (but see Nondeductible losses , next, for exceptions). File back taxes Floods. File back taxes 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. File back taxes Mine cave-ins. File back taxes Shipwrecks. File back taxes Sonic booms. File back taxes Storms, including hurricanes and tornadoes. File back taxes Terrorist attacks. File back taxes Vandalism. File back taxes Volcanic eruptions. File back taxes Nondeductible losses. File back taxes   A casualty loss is not deductible if the damage or destruction is caused by the following. File back taxes Accidentally breaking articles such as glassware or china under normal conditions. File back taxes A family pet (explained below). File back taxes A fire if you willfully set it or pay someone else to set it. File back taxes A car accident if your willful negligence or willful act caused it. File back taxes The same is true if the willful act or willful negligence of someone acting for you caused the accident. File back taxes Progressive deterioration (explained later). File back taxes Family pet. File back taxes   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed earlier under Casualty are met. File back taxes Example. File back taxes Your antique oriental rug was damaged by your new puppy before it was housebroken. File back taxes Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. File back taxes Progressive deterioration. File back taxes    Loss of property due to progressive deterioration is not deductible as a casualty loss. File back taxes This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. File back taxes The following are examples of damage due to progressive deterioration. File back taxes The steady weakening of a building due to normal wind and weather conditions. File back taxes The deterioration and damage to a water heater that bursts. File back taxes However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. File back taxes Most losses of property caused by droughts. File back taxes To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. File back taxes Termite or moth damage. File back taxes The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. File back taxes However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. File back taxes Damage from corrosive drywall. File back taxes   Under a special procedure, you may be able to claim a casualty loss deduction for amounts you paid to repair damage to your home and household appliances that resulted from corrosive drywall. File back taxes For details, see Publication 547. File back taxes Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. File back taxes The taking of property must be illegal under the laws of the state where it occurred and it must have been done with criminal intent. File back taxes You do not need to show a conviction for theft. File back taxes Theft includes the taking of money or property by the following means. File back taxes Blackmail. File back taxes Burglary. File back taxes Embezzlement. File back taxes Extortion. File back taxes Kidnapping for ransom. File back taxes Larceny. File back taxes Robbery. File back taxes The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. File back taxes Decline in market value of stock. File back taxes   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. File back taxes 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. File back taxes You report a capital loss on Schedule D (Form 1040). File back taxes For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. File back taxes Mislaid or lost property. File back taxes   The simple disappearance of money or property is not a theft. File back taxes 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. File back taxes Sudden, unexpected, and unusual events are defined earlier. File back taxes Example. File back taxes A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. File back taxes The diamond falls from the ring and is never found. File back taxes The loss of the diamond is a casualty. File back taxes Losses from Ponzi-type investment schemes. File back taxes   If you had a loss from a Ponzi-type investment scheme, see: Revenue Ruling 2009-9, 2009-14 I. File back taxes R. File back taxes B. File back taxes 735 (available at www. File back taxes irs. File back taxes gov/irb/2009-14_IRB/ar07. File back taxes html). File back taxes Revenue Procedure 2009-20, 2009-14 I. File back taxes R. File back taxes B. File back taxes 749 (available at www. File back taxes irs. File back taxes gov/irb/2009-14_IRB/ar11. File back taxes html). File back taxes Revenue Procedure 2011-58, 2011-50 I. File back taxes R. File back taxes B. File back taxes 849 (available at www. File back taxes irs. File back taxes gov/irb/2011-50_IRB/ar11. File back taxes html). File back taxes If you qualify to use Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, and you choose to follow the procedures in the guidance, first fill out Section C of Form 4684 to determine the amount to enter on Section B, line 28. File back taxes Skip lines 19 to 27. File back taxes Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. File back taxes You do not need to complete Appendix A. File back taxes For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. File back taxes   If you choose not to use the procedures in Revenue Procedure 2009-20, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. File back taxes Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. File back taxes If you incurred this type of loss, you can choose one of the following ways to deduct the loss. File back taxes As a casualty loss. File back taxes As an ordinary loss. File back taxes As a nonbusiness bad debt. File back taxes Casualty loss or ordinary loss. File back taxes   You can choose to deduct a loss on deposits as a casualty loss or as an ordinary loss for any year in which you can reasonably estimate how much of your deposits you have lost in an insolvent or bankrupt financial institution. File back taxes The choice is generally made on the return you file for that year and applies to all your losses on deposits for the year in that particular financial institution. File back taxes If you treat the loss as a casualty or ordinary loss, you cannot treat the same amount of the loss as a nonbusiness bad debt when it actually becomes worthless. File back taxes However, you can take a nonbusiness bad debt deduction for any amount of loss that is more than the estimated amount you deducted as a casualty or ordinary loss. File back taxes Once you make this choice, you cannot change it without permission from the Internal Revenue Service. File back taxes   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. File back taxes The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. File back taxes Your loss is subject to the 2%-of-adjusted-gross-income limit. File back taxes You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. File back taxes Nonbusiness bad debt. File back taxes   If you do not choose to deduct the loss as a casualty loss or as an ordinary loss, you must wait until the year the actual loss is determined and deduct the loss as a nonbusiness bad debt in that year. File back taxes How to report. File back taxes   The kind of deduction you choose for your loss on deposits determines how you report your loss. File back taxes If you choose: Casualty loss — report it on Form 4684 first and then on Schedule A (Form 1040). File back taxes Ordinary loss — report it on Schedule A (Form 1040) as a miscellaneous itemized deduction. File back taxes Nonbusiness bad debt — report it on Form 8949 first and then on Schedule D (Form 1040). File back taxes More information. File back taxes   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684 or Deposit in Insolvent or Bankrupt Financial Institution in Publication 550. File back taxes Proof of Loss To deduct a casualty or theft loss, you must be able to prove that you had a casualty or theft. File back taxes You also must be able to support the amount you take as a deduction. File back taxes Casualty loss proof. File back taxes   For a casualty loss, your records should show all the following. File back taxes The type of casualty (car accident, fire, storm, etc. File back taxes ) and when it occurred. File back taxes That the loss was a direct result of the casualty. File back taxes 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. File back taxes Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. File back taxes Theft loss proof. File back taxes   For a theft loss, your records should show all the following. File back taxes When you discovered that your property was missing. File back taxes That your property was stolen. File back taxes That you were the owner of the property. File back taxes Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. File back taxes It is important that you have records that will prove your deduction. File back taxes If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. File back taxes Figuring a Loss Figure the amount of your loss using the following steps. File back taxes Determine your adjusted basis in the property before the casualty or theft. File back taxes Determine the decrease in fair market value of the property as a result of the casualty or theft. File back taxes From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. File back taxes For personal-use property and property used in performing services as an employee, apply the deduction limits, discussed later, to determine the amount of your deductible loss. File back taxes Gain from reimbursement. File back taxes   If your reimbursement is more than your adjusted basis in the property, you have a gain. File back taxes This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. File back taxes If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. File back taxes See Publication 547 for more information on how to treat a gain from a reimbursement for a casualty or theft. File back taxes Leased property. File back taxes   If you are liable for casualty damage to property you lease, your loss is the amount you must pay to repair the property minus any insurance or other reimbursement you receive or expect to receive. File back taxes Decrease in Fair Market Value Fair market value (FMV) is the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts. File back taxes The decrease in FMV used to figure the amount of a casualty or theft loss is the difference between the property's fair market value immediately before and immediately after the casualty or theft. File back taxes FMV of stolen property. File back taxes   The FMV of property immediately after a theft is considered to be zero, since you no longer have the property. File back taxes Example. File back taxes Several years ago, you purchased silver dollars at face value for $150. File back taxes This is your adjusted basis in the property. File back taxes Your silver dollars were stolen this year. File back taxes The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. File back taxes Your theft loss is $150. File back taxes Recovered stolen property. File back taxes   Recovered stolen property is your property that was stolen and later returned to you. File back taxes If you recovered property after you had already taken a theft loss deduction, you must refigure your loss using the smaller of the property's adjusted basis (explained later) or the decrease in FMV from the time just before it was stolen until the time it was recovered. File back taxes Use this amount to refigure your total loss for the year in which the loss was deducted. File back taxes   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. File back taxes But report the difference only up to the amount of the loss that reduced your tax. File back taxes For more information on the amount to report, see Recoveries in chapter 12. File back taxes Figuring Decrease in FMV— Items To Consider To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. File back taxes However, other measures can also be used to establish certain decreases. File back taxes Appraisal. File back taxes   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. File back taxes The appraiser must recognize the effects of any general market decline that may occur along with the casualty. File back taxes This information is needed to limit any deduction to the actual loss resulting from damage to the property. File back taxes   Several factors are important in evaluating the accuracy of an appraisal, including the following. File back taxes The appraiser's familiarity with your property before and after the casualty or theft. File back taxes The appraiser's knowledge of sales of comparable property in the area. File back taxes The appraiser's knowledge of conditions in the area of the casualty. File back taxes The appraiser's method of appraisal. File back taxes    You may be able to use an appraisal that you used to get a federal loan (or a federal loan guarantee) as the result of a federally declared disaster to establish the amount of your disaster loss. File back taxes For more information on disasters, see Disaster Area Losses, in Pub. File back taxes 547. File back taxes Cost of cleaning up or making repairs. File back taxes   The cost of repairing damaged property is not part of a casualty loss. File back taxes Neither is the cost of cleaning up after a casualty. File back taxes 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. File back taxes The repairs are actually made. File back taxes The repairs are necessary to bring the property back to its condition before the casualty. File back taxes The amount spent for repairs is not excessive. File back taxes The repairs take care of the damage only. File back taxes The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. File back taxes Landscaping. File back taxes   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. File back taxes You may be able to measure your loss by what you spend on the following. File back taxes Removing destroyed or damaged trees and shrubs minus any salvage you receive. File back taxes Pruning and other measures taken to preserve damaged trees and shrubs. File back taxes Replanting necessary to restore the property to its approximate value before the casualty. File back taxes Car value. File back taxes    Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. File back taxes You can use the book's retail values and modify them by such factors as mileage and the condition of your car to figure its value. File back taxes The prices are not official, but they may be useful in determining value and suggesting relative prices for comparison with current sales and offerings in your area. File back taxes If your car is not listed in the books, determine its value from other sources. File back taxes A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. File back taxes Figuring Decrease in FMV— Items Not To Consider You generally should not consider the following items when attempting to establish the decrease in FMV of your property. File back taxes Cost of protection. File back taxes   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. File back taxes The amount you spend on insurance or to board up your house against a storm is not part of your loss. File back taxes   If you make permanent improvements to your property to protect it against a casualty or theft, add the cost of these improvements to your basis in the property. File back taxes An example would be the cost of a dike to prevent flooding. File back taxes Exception. File back taxes   You cannot increase your basis in the property by, or deduct as a business expense, any expenditures you made with respect to qualified disaster mitigation payments. File back taxes See Disaster Area Losses in Publication 547. File back taxes Incidental expenses. File back taxes   Any incidental expenses you have due to a casualty or theft, such as expenses for the treatment of personal injuries, for temporary housing, or for a rental car, are not part of your casualty or theft loss. File back taxes Replacement cost. File back taxes   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. File back taxes Sentimental value. File back taxes   Do not consider sentimental value when determining your loss. File back taxes If a family portrait, heirloom, or keepsake is damaged, destroyed, or stolen, you must base your loss on its FMV, as limited by your adjusted basis in the property. File back taxes Decline in market value of property in or near casualty area. File back taxes   A decrease in the value of your property because it is in or near an area that suffered a casualty, or that might again suffer a casualty, is not to be taken into consideration. File back taxes You have a loss only for actual casualty damage to your property. File back taxes However, if your home is in a federally declared disaster area, see Disaster Area Losses in Publication 547. File back taxes Costs of photographs and appraisals. File back taxes    Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. File back taxes Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. File back taxes    Appraisals are used to figure the decrease in FMV because of a casualty or theft. File back taxes See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. File back taxes   The costs of photographs and appraisals used as evidence of the value and condition of property damaged as a result of a casualty are not a part of the loss. File back taxes You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). File back taxes For information about miscellaneous deductions, see chapter 28. File back taxes Adjusted Basis Adjusted basis is your basis in the property (usually cost) increased or decreased by various events, such as improvements and casualty losses. File back taxes For more information, see chapter 13. File back taxes Insurance and Other Reimbursements If you receive an insurance payment or other type of reimbursement, you must subtract the reimbursement when you figure your loss. File back taxes You do not have a casualty or theft loss to the extent you are reimbursed. File back taxes If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. File back taxes You must reduce your loss even if you do not receive payment until a later tax year. File back taxes See Reimbursement Received After Deducting Loss , later. File back taxes Failure to file a claim for reimbursement. File back taxes   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. File back taxes Otherwise, you cannot deduct this loss as a casualty or theft loss. File back taxes However, this rule does not apply to the portion of the loss not covered by insurance (for example, a deductible). File back taxes Example. File back taxes You have a car insurance policy with a $1,000 deductible. File back taxes Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the deduction limits discussed later). File back taxes This is true even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. File back taxes Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. File back taxes Other types of reimbursements are discussed next. File back taxes Also see the Instructions for Form 4684. File back taxes Employer's emergency disaster fund. File back taxes   If you receive money from your employer's emergency disaster fund and you must use that money to rehabilitate or replace property on which you are claiming a casualty loss deduction, you must take that money into consideration in computing the casualty loss deduction. File back taxes Take into consideration only the amount you used to replace your destroyed or damaged property. File back taxes Example. File back taxes Your home was extensively damaged by a tornado. File back taxes Your loss after reimbursement from your insurance company was $10,000. File back taxes Your employer set up a disaster relief fund for its employees. File back taxes Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. File back taxes You received $4,000 from the fund and spent the entire amount on repairs to your home. File back taxes In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. File back taxes Your casualty loss before applying the deduction limits discussed later is $6,000. File back taxes Cash gifts. File back taxes   If you receive excludable cash gifts as a disaster victim and there are no limits on how you can use the money, you do not reduce your casualty loss by these excludable cash gifts. File back taxes This applies even if you use the money to pay for repairs to property damaged in the disaster. File back taxes Example. File back taxes Your home was damaged by a hurricane. File back taxes Relatives and neighbors made cash gifts to you that were excludable from your income. File back taxes You used part of the cash gifts to pay for repairs to your home. File back taxes There were no limits or restrictions on how you could use the cash gifts. File back taxes Because it was an excludable gift, the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. File back taxes Insurance payments for living expenses. File back taxes   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. File back taxes You lose the use of your main home because of a casualty. File back taxes Government authorities do not allow you access to your main home because of a casualty or threat of one. File back taxes Inclusion in income. File back taxes   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. File back taxes Report this amount on Form 1040, line 21. File back taxes However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. File back taxes See Qualified disaster relief payments, under Disaster Area Losses in Publication 547. File back taxes   A temporary increase in your living expenses is the difference between the actual living expenses you and your family incurred during the period you could not use your home and your normal living expenses for that period. File back taxes Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. File back taxes Generally, these expenses include the amounts you pay for the following. File back taxes Rent for suitable housing. File back taxes Transportation. File back taxes Food. File back taxes Utilities. File back taxes Miscellaneous services. File back taxes Normal living expenses consist of these same expenses that you would have incurred but did not because of the casualty or the threat of one. File back taxes Example. File back taxes As a result of a fire, you vacated your apartment for a month and moved to a motel. File back taxes You normally pay $525 a month for rent. File back taxes None was charged for the month the apartment was vacated. File back taxes Your motel rent for this month was $1,200. File back taxes You normally pay $200 a month for food. File back taxes Your food expenses for the month you lived in the motel were $400. File back taxes You received $1,100 from your insurance company to cover your living expenses. File back taxes You determine the payment you must include in income as follows. File back taxes 1) Insurance payment for living expenses $1,100 2) Actual expenses during the month you are unable to use your home because of fire 1,600   3) Normal living expenses 725   4) Temporary increase in living  expenses: Subtract line 3 from line 2 875 5) Amount of payment includible  in income: Subtract line 4  from line 1 $ 225 Tax year of inclusion. File back taxes   You include the taxable part of the insurance payment in income for the year you regain the use of your main home or, if later, for the year you receive the taxable part of the insurance payment. File back taxes Example. File back taxes Your main home was destroyed by a tornado in August 2011. File back taxes You regained use of your home in November 2012. File back taxes The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. File back taxes You include this amount in income on your 2012 Form 1040. File back taxes If, in 2013, you receive further payments to cover the living expenses you had in 2011 and 2012, you must include those payments in income on your 2013 Form 1040. File back taxes Disaster relief. File back taxes   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. File back taxes Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster are not taxable income to you. File back taxes For more information, see Disaster Area Losses in Publication 547. File back taxes Disaster unemployment assistance payments are unemployment benefits that are taxable. File back taxes Generally, disaster relief grants and qualified disaster mitigation payments made under the Robert T. File back taxes Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not includible in your income. File back taxes See Disaster Area Losses in Publication 547. File back taxes Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you receive your actual reimbursement. File back taxes This section explains the adjustment you may have to make. File back taxes Actual reimbursement less than expected. File back taxes   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. File back taxes Example. File back taxes Your personal car had an FMV of $2,000 when it was destroyed in a collision with another car in 2012. File back taxes The accident was due to the negligence of the other driver. File back taxes At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. File back taxes You did not have a deductible loss in 2012. File back taxes In January 2013, the court awarded you a judgment of $2,000. File back taxes However, in July it became apparent that you will be unable to collect any amount from the other driver. File back taxes You can deduct the loss in 2013 subject to the limits discussed later. File back taxes Actual reimbursement more than expected. File back taxes   If you later receive more reimbursement than you expected after you claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. File back taxes However, if any part of the original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. File back taxes You do not refigure your tax for the year you claimed the deduction. File back taxes For more information, see Recoveries in chapter 12. File back taxes 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. File back taxes If you have already taken a deduction for a loss and you receive the reimbursement in a later year, you may have to include the gain in your income for the later year. File back taxes Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. File back taxes See Figuring a Gain in Publication 547 for more information on how to treat a gain from the reimbursement of a casualty or theft. File back taxes Actual reimbursement same as expected. File back taxes   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. File back taxes Example. File back taxes In December 2013, you had a collision while driving your personal car. File back taxes Repairs to the car cost $950. File back taxes You had $100 deductible collision insurance. File back taxes Your insurance company agreed to reimburse you for the rest of the damage. File back taxes Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. File back taxes Due to the $100 rule (discussed later under Deduction Limits ), you cannot deduct the $100 you paid as the deductible. File back taxes When you receive the $850 from the insurance company in 2014, do not report it as income. File back taxes Single Casualty on Multiple Properties Personal property. File back taxes   Personal property is any property that is not real property. File back taxes If your personal property is stolen or is damaged or destroyed by a casualty, you must figure your loss separately for each item of property. File back taxes Then combine these separate losses to figure the total loss from that casualty or theft. File back taxes Example. File back taxes A fire in your home destroyed an upholstered chair, an oriental rug, and an antique table. File back taxes You did not have fire insurance to cover your loss. File back taxes (This was the only casualty or theft you had during the year. File back taxes ) You paid $750 for the chair and you established that it had an FMV of $500 just before the fire. File back taxes The rug cost $3,000 and had an FMV of $2,500 just before the fire. File back taxes You bought the table at an auction for $100 before discovering it was an antique. File back taxes It had been appraised at $900 before the fire. File back taxes You figure your loss on each of these items as follows:     Chair Rug Table 1) Basis (cost) $750 $3,000 $100 2) FMV before fire $500 $2,500 $900 3) FMV after fire –0– –0– –0– 4) Decrease in FMV $500 $2,500 $900 5) Loss (smaller of (1) or  (4)) $500 $2,500 $100           6) Total loss     $3,100 Real property. File back taxes   In figuring a casualty loss on personal-use real property, treat the entire property (including any improvements, such as buildings, trees, and shrubs) as one item. File back taxes Figure the loss using the smaller of the adjusted basis or the decrease in FMV of the entire property. File back taxes Example. File back taxes You bought your home a few years ago. File back taxes You paid $160,000 ($20,000 for the land and $140,000 for the house). File back taxes You also spent $2,000 for landscaping. File back taxes This year a fire destroyed your home. File back taxes The fire also damaged the shrubbery and trees in your yard. File back taxes The fire was your only casualty or theft loss this year. File back taxes Competent appraisers valued the property as a whole at $200,000 before the fire, but only $30,000 after the fire. File back taxes (The loss to your household furnishings is not shown in this example. File back taxes It would be figured separately on each item, as explained earlier under Personal property . File back taxes ) Shortly after the fire, the insurance company paid you $155,000 for the loss. File back taxes You figure your casualty loss as follows: 1) Adjusted basis of the entire property (land, building, and landscaping) $162,000 2) FMV of entire property before fire $200,000 3) FMV of entire property after fire 30,000 4) Decrease in FMV of entire  property $170,000 5) Loss (smaller of (1) or (4)) $162,000 6) Subtract insurance 155,000 7) Amount of loss after reimbursement $7,000 Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. File back taxes If the loss was to property for your personal use or your family's use, there are two limits on the amount you can deduct for your casualty or theft loss. File back taxes You must reduce each casualty or theft loss by $100 ($100 rule). File back taxes You must further reduce the total of all your casualty or theft losses by 10% of your adjusted gross income (10% rule). File back taxes You make these reductions on Form 4684. File back taxes These rules are explained next and Table 25-1 summarizes how to apply the $100 rule and the 10% rule in various situations. File back taxes For more detailed explanations and examples, see Publication 547. File back taxes Table 25-1. File back taxes How To Apply the Deduction Limits for Personal-Use Property   $100 Rule 10% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. File back taxes Apply this rule after you have figured the amount of your loss. File back taxes You must reduce your total casualty or theft loss by 10% of your adjusted gross income. File back taxes Apply this rule after you reduce each loss by $100 (the $100 rule). File back taxes Single Event Apply this rule only once, even if many pieces of property are affected. File back taxes Apply this rule only once, even if many pieces of property are affected. File back taxes More Than One Event Apply to the loss from each event. File back taxes Apply to the total of all your losses from all events. File back taxes More Than One Person— With Loss From the Same Event (other than a married couple filing jointly) Apply separately to each person. File back taxes Apply separately to each person. File back taxes Married Couple—With Loss From the Same Event Filing Jointly Apply as if you were one person. File back taxes Apply as if you were one person. File back taxes Filing Separately Apply separately to each spouse. File back taxes Apply separately to each spouse. File back taxes More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. File back taxes Apply separately to each owner of jointly owned property. File back taxes Property used partly for business and partly for personal purposes. File back taxes   When property is used partly for personal purposes and partly for business or income-producing purposes, the casualty or theft loss deduction must be figured separately for the personal-use part and for the business or income-producing part. File back taxes You must figure each loss separately because the $100 rule and the 10% rule apply only to the loss on the personal-use part of the property. File back taxes $100 Rule After you have figured your casualty or theft loss on personal-use property, you must reduce that loss by $100. File back taxes This reduction applies to each total casualty or theft loss. File back taxes It does not matter how many pieces of property are involved in an event. File back taxes Only a single $100 reduction applies. File back taxes Example. File back taxes A hailstorm damages your home and your car. File back taxes Determine the amount of loss, as discussed earlier, for each of these items. File back taxes Since the losses are due to a single event, you combine the losses and reduce the combined amount by $100. File back taxes Single event. File back taxes   Generally, events closely related in origin cause a single casualty. File back taxes It is a single casualty when the damage is from two or more closely related causes, such as wind and flood damage caused by the same storm. File back taxes 10% Rule You must reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. File back taxes Apply this rule after you reduce each loss by $100. File back taxes For more information, see the Form 4684 instructions. File back taxes If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. File back taxes Example 1. File back taxes In June, you discovered that your house had been burglarized. File back taxes Your loss after insurance reimbursement was $2,000. File back taxes Your adjusted gross income for the year you discovered the theft is $29,500. File back taxes You first apply the $100 rule and then the 10% rule. File back taxes Figure your theft loss deduction as follows. File back taxes 1) Loss after insurance $2,000 2) Subtract $100 100 3) Loss after $100 rule $1,900 4) Subtract 10% × $29,500 AGI 2,950 5) Theft loss deduction –0– You do not have a theft loss deduction because your loss after you apply the $100 rule ($1,900) is less than 10% of your adjusted gross income ($2,950). File back taxes Example 2. File back taxes In March, you had a car accident that totally destroyed your car. File back taxes You did not have collision insurance on your car, so you did not receive any insurance reimbursement. File back taxes Your loss on the car was $1,800. File back taxes In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items stored there. File back taxes Your loss on the basement items after reimbursement was $2,100. File back taxes Your adjusted gross income for the year that the accident and fire occurred is $25,000. File back taxes You figure your casualty loss deduction as follows. File back taxes       Base-     Car ment 1) Loss $1,800 $2,100 2) Subtract $100 per incident 100 100 3) Loss after $100 rule $1,700 $2,000 4) Total loss $3,700 5) Subtract 10% × $25,000 AGI 2,500 6) Casualty loss deduction $1,200 Gains and losses. File back taxes   If you had both gains and losses from casualties or thefts to personal-use property, you must compare your total gains to your total losses. File back taxes Do this after you have reduced each loss by any reimbursements and by $100, but before you have reduced the losses by 10% of your adjusted gross income. File back taxes Casualty or theft gains do not include gains you choose to postpone. File back taxes See Publication 547 for information on the postponement of gain. File back taxes Losses more than gains. File back taxes   If your losses are more than your recognized gains, subtract your gains from your losses and reduce the result by 10% of your adjusted gross income. File back taxes The rest, if any, is your deductible loss from personal-use property. File back taxes Gains more than losses. File back taxes   If your recognized gains are more than your losses, subtract your losses from your gains. File back taxes The difference is treated as capital gain and must be reported on Schedule D (Form 1040). File back taxes The 10% rule does not apply to your gains. File back taxes When To Report Gains and Losses Gains. File back taxes   If you receive an insurance or other reimbursement that is more than your adjusted basis in the destroyed or stolen property, you have a gain from the casualty or theft. File back taxes You must include this gain in your income in the year you receive the reimbursement, unless you choose to postpone reporting the gain as explained in Publication 547. File back taxes If you have a loss, see Table 25-2 . File back taxes Table 25-2. File back taxes When To Deduct a Loss IF you have a loss. File back taxes . File back taxes . File back taxes THEN deduct it in the year. File back taxes . File back taxes . File back taxes from a casualty, the loss occurred. File back taxes in a federally declared disaster area, the disaster occurred or the year immediately before the disaster. File back taxes from a theft, the theft was discovered. File back taxes on a deposit treated as a:   • casualty or any ordinary loss, a reasonable estimate can be made. File back taxes • bad debt, deposits are totally worthless. File back taxes Losses. File back taxes   Generally, you can deduct a casualty loss that is not reimbursable only in the tax year in which the casualty occurred. File back taxes This is true even if you do not repair or replace the damaged property until a later year. File back taxes   You can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. File back taxes   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. File back taxes Loss on deposits. File back taxes   If your loss is a loss on deposits in an insolvent or bankrupt financial institution, see Loss on Deposits , earlier. File back taxes Disaster Area Loss You generally must deduct a casualty loss in the year it occurred. File back taxes However, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct the loss on your tax return or amended return for either of the following years. File back taxes The year the disaster occurred. File back taxes The year immediately preceding the year the disaster occurred. File back taxes Gains. File back taxes    Special rules apply if you choose to postpone reporting gain on property damaged or destroyed in a federally declared disaster area. File back taxes For those special rules, see Publication 547. File back taxes Postponed tax deadlines. File back taxes   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. File back taxes The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. File back taxes   If any tax deadline is postponed, the IRS will publicize the postponement in your area by publishing a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). File back taxes Go to www. File back taxes irs. File back taxes gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. File back taxes Who is eligible. File back taxes   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. File back taxes Any individual whose main home is located in a covered disaster area (defined next). File back taxes Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. File back taxes Any individual who is a relief worker affiliated with a recognized government or philanthropic organization who is assisting in a covered disaster area. File back taxes 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. File back taxes The main home or principal place of business does not have to be located in the covered disaster area. File back taxes 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. File back taxes The spouse on a joint return with a taxpayer who is eligible for postponements. File back taxes Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose records necessary to meet a postponed tax deadline are located in the covered disaster area. File back taxes Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. File back taxes Any other person determined by the IRS to be affected by a federally declared disaster. File back taxes Covered disaster area. File back taxes   This is an area of a federally declared disaster in which the IRS has decided to postpone tax deadlines for up to 1 year. File back taxes Abatement of interest and penalties. File back taxes   The IRS may abate the interest and penalties on underpaid income tax for the length of any postponement of tax deadlines. File back taxes More information. File back taxes   For more information, see Disaster Area Losses in Publication 547. File back taxes How To Report Gains and Losses Use Form 4684 to report a gain or a deductible loss from a casualty or theft. File back taxes If you have more than one casualty or theft, use a separate Form 4684 to determine your gain or loss for each event. File back taxes Combine the gains and losses on one Form 4684. File back taxes Follow the form instructions as to which lines to fill out. File back taxes In addition, you must use the appropriate schedule to report a gain or loss. File back taxes The schedule you use depends on whether you have a gain or loss. File back taxes If you have a: Report it on: Gain Schedule D (Form 1040) Loss Schedule A (Form 1040) Adjustments to basis. File back taxes   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. File back taxes Amounts you spend to restore your property after a casualty increase your adjusted basis. File back taxes See Adjusted Basis in chapter 13 for more information. File back taxes Net operating loss (NOL). File back taxes    If your casualty or theft loss deduction causes your deductions for the year to be more than your income for the year, you may have an NOL. File back taxes You can use an NOL to lower your tax in an earlier year, allowing you to get a refund for tax you have already paid. File back taxes Or, you can use it to lower your tax in a later year. File back taxes You do not have to be in business to have an NOL from a casualty or theft loss. File back taxes For more information, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. File back taxes Prev  Up  Next   Home   More Online Publications