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Tax Adjustment Form

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Tax Adjustment Form

Tax adjustment form Part Two -   Income The eight chapters in this part discuss many kinds of income. Tax adjustment form They explain which income is and is not taxed. Tax adjustment form See Part Three for information on gains and losses you report on Form 8949 and Schedule D (Form 1040) and for information on selling your home. Tax adjustment form Table of Contents 5. Tax adjustment form   Wages, Salaries, and Other EarningsReminder Introduction Useful Items - You may want to see: Employee CompensationBabysitting. Tax adjustment form Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits 6. Tax adjustment form   Tip IncomeIntroduction Useful Items - You may want to see: Keeping a Daily Tip RecordElectronic tip record. Tax adjustment form Reporting Tips to Your EmployerElectronic tip statement. Tax adjustment form Final report. Tax adjustment form Reporting Tips on Your Tax Return Allocated Tips 7. Tax adjustment form   Interest IncomeReminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. Tax adjustment form Custodian account for your child. Tax adjustment form Penalty for failure to supply SSN. Tax adjustment form Reporting backup withholding. Tax adjustment form Savings account with parent as trustee. Tax adjustment form Interest not reported on Form 1099-INT. Tax adjustment form Nominees. Tax adjustment form Incorrect amount. Tax adjustment form Information reporting requirement. Tax adjustment form Taxable InterestInterest subject to penalty for early withdrawal. Tax adjustment form Money borrowed to invest in certificate of deposit. Tax adjustment form U. Tax adjustment form S. Tax adjustment form Savings Bonds Education Savings Bond Program U. Tax adjustment form S. Tax adjustment form Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Original Issue Discount (OID) When To Report Interest IncomeConstructive receipt. Tax adjustment form How To Report Interest IncomeSchedule B (Form 1040A or 1040). Tax adjustment form Reporting tax-exempt interest. Tax adjustment form U. Tax adjustment form S. Tax adjustment form savings bond interest previously reported. Tax adjustment form 8. Tax adjustment form   Dividends and Other DistributionsReminder Introduction Useful Items - You may want to see: General InformationDividends not reported on Form 1099-DIV. Tax adjustment form Reporting tax withheld. Tax adjustment form Nominees. Tax adjustment form Ordinary DividendsQualified Dividends Dividends Used to Buy More Stock Money Market Funds Capital Gain DistributionsBasis adjustment. Tax adjustment form Nondividend DistributionsLiquidating Distributions Distributions of Stock and Stock Rights Other DistributionsInformation reporting requirement. Tax adjustment form Alternative minimum tax treatment. Tax adjustment form How To Report Dividend IncomeInvestment interest deducted. Tax adjustment form 9. Tax adjustment form   Rental Income and ExpensesIntroduction Useful Items - You may want to see: Rental Income Rental ExpensesVacant while listed for sale. Tax adjustment form Repairs and Improvements Other Expenses Property Changed to Rental Use Renting Part of Property Not Rented for Profit Personal Use of Dwelling Unit (Including Vacation Home)Example. Tax adjustment form Dividing Expenses Dwelling Unit Used as a Home Reporting Income and Deductions DepreciationChanging your accounting method to deduct unclaimed depreciation. Tax adjustment form Limits on Rental LossesAt-Risk Rules Passive Activity Limits How To Report Rental Income and ExpensesSchedule E (Form 1040) 10. Tax adjustment form   Retirement Plans, Pensions, and AnnuitiesWhat's New Reminder IntroductionThe General Rule. Tax adjustment form Individual retirement arrangements (IRAs). Tax adjustment form Civil service retirement benefits. Tax adjustment form Useful Items - You may want to see: General InformationIn-plan rollovers to designated Roth accounts. Tax adjustment form How To Report Cost (Investment in the Contract) Taxation of Periodic PaymentsExclusion limited to cost. Tax adjustment form Exclusion not limited to cost. Tax adjustment form Simplified Method Taxation of Nonperiodic PaymentsLump-Sum Distributions RolloversIn-plan rollovers to designated Roth accounts. Tax adjustment form Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and Beneficiaries 11. Tax adjustment form   Social Security and Equivalent Railroad Retirement BenefitsIntroduction Useful Items - You may want to see: Are Any of Your Benefits Taxable? How To Report Your BenefitsHow Much Is Taxable? Examples Deductions Related to Your BenefitsRepayments More Than Gross Benefits 12. Tax adjustment form   Other IncomeIntroduction Useful Items - You may want to see: Bartering Canceled DebtsInterest included in canceled debt. Tax adjustment form Exceptions Host or Hostess Life Insurance ProceedsSurviving spouse. Tax adjustment form Endowment Contract Proceeds Accelerated Death Benefits Public Safety Officer Killed in the Line of Duty Partnership Income S Corporation Income RecoveriesItemized Deduction Recoveries Rents from Personal Property RepaymentsMethod 1. Tax adjustment form Method 2. Tax adjustment form RoyaltiesDepletion. Tax adjustment form Coal and iron ore. Tax adjustment form Sale of property interest. Tax adjustment form Part of future production sold. Tax adjustment form Unemployment BenefitsTypes of unemployment compensation. Tax adjustment form Governmental program. Tax adjustment form Repayment of unemployment compensation. Tax adjustment form Tax withholding. Tax adjustment form Repayment of benefits. Tax adjustment form Welfare and Other Public Assistance Benefits Other IncomeEmotional distress. Tax adjustment form Deduction for costs involved in unlawful discrimination suits. Tax adjustment form Energy conservation measure. Tax adjustment form Dwelling unit. Tax adjustment form Current income required to be distributed. Tax adjustment form Current income not required to be distributed. Tax adjustment form How to report. Tax adjustment form Losses. Tax adjustment form Grantor trust. Tax adjustment form Nonemployee compensation. Tax adjustment form Corporate director. Tax adjustment form Personal representatives. Tax adjustment form Manager of trade or business for bankruptcy estate. Tax adjustment form Notary public. Tax adjustment form Election precinct official. Tax adjustment form Difficulty-of-care payments. Tax adjustment form Maintaining space in home. Tax adjustment form Reporting taxable payments. Tax adjustment form Lotteries and raffles. Tax adjustment form Form W-2G. Tax adjustment form Reporting winnings and recordkeeping. Tax adjustment form Inherited pension or IRA. Tax adjustment form Employee awards or bonuses. Tax adjustment form Pulitzer, Nobel, and similar prizes. Tax adjustment form Payment for services. Tax adjustment form VA payments. Tax adjustment form Prizes. Tax adjustment form Strike and lockout benefits. Tax adjustment form Prev  Up  Next   Home   More Online Publications
 

The Tax Adjustment Form

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