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What Is 1040x

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What Is 1040x

What is 1040x 11. What is 1040x   Casualties, Thefts, and Condemnations Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Casualties and TheftsDeductible losses. What is 1040x Nondeductible losses. What is 1040x Family pet. What is 1040x Progressive deterioration. What is 1040x Decline in market value of stock. What is 1040x Mislaid or lost property. What is 1040x 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. What is 1040x Related persons. What is 1040x Replacement Property Replacement Period How To Postpone Gain Disaster Area LossesWho is eligible. What is 1040x Covered disaster area. What is 1040x Reporting Gains and Losses Introduction This chapter explains the tax treatment of casualties, thefts, and condemnations. What is 1040x A casualty occurs when property is damaged, destroyed, or lost due to a sudden, unexpected, or unusual event. What is 1040x A theft occurs when property is stolen. What is 1040x A condemnation occurs when private property is legally taken for public use without the owner's consent. What is 1040x A casualty, theft, or condemnation may result in a deductible loss or taxable gain on your federal income tax return. What is 1040x 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. What is 1040x 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. What is 1040x 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. What is 1040x For more information, see Postponing Gain , later. What is 1040x 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. What is 1040x Casualties and Thefts If your property is destroyed, damaged, or stolen, you may have a deductible loss. What is 1040x 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. What is 1040x Casualty. What is 1040x   A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. What is 1040x A sudden event is one that is swift, not gradual or progressive. What is 1040x An unexpected event is one that is ordinarily unanticipated and unintended. What is 1040x 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. What is 1040x Deductible losses. What is 1040x   Deductible casualty losses can result from a number of different causes, including the following. What is 1040x Airplane crashes. What is 1040x Car, truck, or farm equipment accidents not resulting from your willful act or willful negligence. What is 1040x Earthquakes. What is 1040x Fires (but see Nondeductible losses next for exceptions). What is 1040x Floods. What is 1040x Freezing. What is 1040x 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. What is 1040x Lightning. What is 1040x Storms, including hurricanes and tornadoes. What is 1040x Terrorist attacks. What is 1040x Vandalism. What is 1040x Volcanic eruptions. What is 1040x Nondeductible losses. What is 1040x   A casualty loss is not deductible if the damage or destruction is caused by the following. What is 1040x Accidentally breaking articles such as glassware or china under normal conditions. What is 1040x A family pet (explained below). What is 1040x A fire if you willfully set it, or pay someone else to set it. What is 1040x A car, truck, or farm equipment accident if your willful negligence or willful act caused it. What is 1040x The same is true if the willful act or willful negligence of someone acting for you caused the accident. What is 1040x Progressive deterioration (explained below). What is 1040x Family pet. What is 1040x   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. What is 1040x Example. What is 1040x You keep your horse in your yard. What is 1040x The ornamental fruit trees in your yard were damaged when your horse stripped the bark from them. What is 1040x Some of the trees were completely girdled and died. What is 1040x Because the damage was not unexpected or unusual, the loss is not deductible. What is 1040x Progressive deterioration. What is 1040x   Loss of property due to progressive deterioration is not deductible as a casualty loss. What is 1040x This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. What is 1040x Examples of damage due to progressive deterioration include damage from rust, corrosion, or termites. What is 1040x However, weather-related conditions or disease may cause another type of involuntary conversion. What is 1040x See Other Involuntary Conversions , later. What is 1040x Theft. What is 1040x   A theft is the taking and removing of money or property with the intent to deprive the owner of it. What is 1040x 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. What is 1040x You do not need to show a conviction for theft. What is 1040x   Theft includes the taking of money or property by the following means: Blackmail, Burglary, Embezzlement, Extortion, Kidnapping for ransom, Larceny, Robbery, or Threats. What is 1040x The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. What is 1040x Decline in market value of stock. What is 1040x   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. What is 1040x 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. What is 1040x You report a capital loss on Schedule D (Form 1040). What is 1040x For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. What is 1040x Mislaid or lost property. What is 1040x   The simple disappearance of money or property is not a theft. What is 1040x 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. What is 1040x Example. What is 1040x A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. What is 1040x The diamond falls from the ring and is never found. What is 1040x The loss of the diamond is a casualty. What is 1040x Farming Losses You can deduct certain casualty or theft losses that occur in the business of farming. What is 1040x The following is a discussion of some losses you can deduct and some you cannot deduct. What is 1040x Livestock or produce bought for resale. What is 1040x   Casualty or theft losses of livestock or produce bought for resale are deductible if you report your income on the cash method. What is 1040x 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. What is 1040x You cannot take a separate deduction. What is 1040x Livestock, plants, produce, and crops raised for sale. What is 1040x   Losses of livestock, plants, produce, and crops raised for sale are generally not deductible if you report your income on the cash method. What is 1040x You have already deducted the cost of raising these items as farm expenses, so their basis is equal to zero. What is 1040x   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. What is 1040x You usually have a tax basis if you capitalized the expenses associated with these plants under the uniform capitalization rules. What is 1040x The uniform capitalization rules are discussed in chapter 6. What is 1040x   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. What is 1040x You get the deduction by omitting the item from your inventory at the close of your tax year. What is 1040x You cannot take a separate casualty or theft deduction. What is 1040x Income loss. What is 1040x   A loss of future income is not deductible. What is 1040x Example. What is 1040x A severe flood destroyed your crops. What is 1040x 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 . What is 1040x You estimate that the crop loss will reduce your farm income by $25,000. What is 1040x This loss of future income is also not deductible. What is 1040x Loss of timber. What is 1040x   If you sell timber downed as a result of a casualty, treat the proceeds from the sale as a reimbursement. What is 1040x If you use the proceeds to buy qualified replacement property, you can postpone reporting the gain. What is 1040x See Postponing Gain , later. What is 1040x Property used in farming. What is 1040x   Casualty and theft losses of property used in your farm business usually result in deductible losses. What is 1040x 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. What is 1040x See How To Figure a Loss , later. What is 1040x Raised draft, breeding, dairy, or sporting animals. What is 1040x   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. What is 1040x 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. What is 1040x You use inventories to determine your income and you included the animals in your inventory. What is 1040x 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. What is 1040x When you include livestock in inventory, its last inventory value is its basis. What is 1040x 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. What is 1040x You cannot take a separate deduction. What is 1040x 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. What is 1040x Farm property. What is 1040x   Farm property is the property you use in your farming business. What is 1040x 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. What is 1040x   If your farm property was partially damaged, use the steps shown under Personal-use property next to figure your casualty loss. What is 1040x However, the deduction limits, discussed later, do not apply to farm property. What is 1040x Personal-use property. What is 1040x   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. What is 1040x The following items are examples of personal-use property: Your main home. What is 1040x Furniture and electronics used in your main home and not used in a home office or for business purposes. What is 1040x Clothing and jewelry. What is 1040x An automobile used for nonbusiness purposes. What is 1040x You figure the casualty or theft loss on this property by taking the following steps. What is 1040x Determine your adjusted basis in the property before the casualty or theft. What is 1040x Determine the decrease in fair market value of the property as a result of the casualty or theft. What is 1040x From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you receive or expect to receive. What is 1040x You must apply the deduction limits, discussed later, to determine your deductible loss. What is 1040x    You can use Publication 584 to list your stolen or damaged personal-use property and figure your loss. What is 1040x It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. What is 1040x Adjusted basis. What is 1040x   Adjusted basis is your basis (usually cost) increased or decreased by various events, such as improvements and casualty losses. What is 1040x For more information about adjusted basis, see chapter 6. What is 1040x Decrease in fair market value (FMV). What is 1040x   The decrease in FMV is the difference between the property's value immediately before the casualty or theft and its value immediately afterward. What is 1040x FMV is defined in chapter 10 under Payments Received or Considered Received . What is 1040x Appraisal. What is 1040x   To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. What is 1040x But other measures, such as the cost of cleaning up or making repairs (discussed next) can be used to establish decreases in FMV. What is 1040x   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. What is 1040x The appraiser must recognize the effects of any general market decline that may occur along with the casualty. What is 1040x This information is needed to limit any deduction to the actual loss resulting from damage to the property. What is 1040x Cost of cleaning up or making repairs. What is 1040x   The cost of cleaning up after a casualty is not part of a casualty loss. What is 1040x Neither is the cost of repairing damaged property after a casualty. What is 1040x 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. What is 1040x The repairs are actually made. What is 1040x The repairs are necessary to bring the property back to its condition before the casualty. What is 1040x The amount spent for repairs is not excessive. What is 1040x The repairs fix the damage only. What is 1040x The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. What is 1040x Related expenses. What is 1040x   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. What is 1040x However, they may be deductible as farm business expenses if the damaged or stolen property is farm property. What is 1040x Separate computations for more than one item of property. What is 1040x   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. What is 1040x Then combine the losses to determine your total loss. What is 1040x    There is an exception to this rule for personal-use real property. What is 1040x See Exception for personal-use real property, later. What is 1040x Example. What is 1040x A fire on your farm damaged a tractor and the barn in which it was stored. What is 1040x The tractor had an adjusted basis of $3,300. What is 1040x Its FMV was $28,000 just before the fire and $10,000 immediately afterward. What is 1040x The barn had an adjusted basis of $28,000. What is 1040x Its FMV was $55,000 just before the fire and $25,000 immediately afterward. What is 1040x You received insurance reimbursements of $2,100 on the tractor and $26,000 on the barn. What is 1040x Figure your deductible casualty loss separately for the two items of property. What is 1040x     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. What is 1040x   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. What is 1040x Figure the loss using the smaller of the following. What is 1040x The decrease in FMV of the entire property. What is 1040x The adjusted basis of the entire property. What is 1040x Example. What is 1040x You bought a farm in 1990 for $160,000. What is 1040x The adjusted basis of the residential part is now $128,000. What is 1040x In 2013, a windstorm blew down shade trees and three ornamental trees planted at a cost of $7,500 on the residential part. What is 1040x The adjusted basis of the residential part includes the $7,500. What is 1040x The fair market value (FMV) of the residential part immediately before the storm was $400,000, and $385,000 immediately after the storm. What is 1040x The trees were not covered by insurance. What is 1040x 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. What is 1040x   If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. What is 1040x You do not have a casualty or theft loss to the extent you are reimbursed. What is 1040x   If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. What is 1040x You must reduce your loss even if you do not receive payment until a later tax year. What is 1040x    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. What is 1040x You may have to include a portion of these payments in your income. What is 1040x See Insurance payments for living expenses in Publication 547 for details. What is 1040x Disaster relief. What is 1040x   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. What is 1040x Excludable cash gifts you receive also do not reduce your casualty loss if there are no limits on how you can use the money. What is 1040x   Generally, disaster relief grants received under the Robert T. What is 1040x Stafford Disaster Relief and Emergency Assistance Act are not included in your income. What is 1040x See Federal disaster relief grants , later, under Disaster Area Losses . What is 1040x   Qualified disaster relief payments for expenses you incurred as a result of a federally declared disaster are not taxable income to you. What is 1040x See Qualified disaster relief payments , later, under Disaster Area Losses . What is 1040x Reimbursement received after deducting loss. What is 1040x   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. What is 1040x Actual reimbursement less than expected. What is 1040x   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. What is 1040x Actual reimbursement more than expected. What is 1040x   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. What is 1040x 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. What is 1040x Do not refigure your tax for the year you claimed the deduction. What is 1040x See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. What is 1040x 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. What is 1040x 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. What is 1040x Actual reimbursement same as expected. What is 1040x   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. What is 1040x Lump-sum reimbursement. What is 1040x   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. What is 1040x Figure the gain or loss separately for each asset that has a separate basis. What is 1040x Adjustments to basis. What is 1040x   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. What is 1040x The result is your adjusted basis in the property. What is 1040x Amounts you spend on repairs to restore your property to its pre-casualty condition increase your adjusted basis. What is 1040x See Adjusted Basis in chapter 6 for more information. What is 1040x Example. What is 1040x You built a new silo for $25,000. What is 1040x This is the basis in your silo because that is the total cost you incurred to build it. What is 1040x During the year, a tornado damaged your silo and your allowable casualty loss deduction was $1,000. What is 1040x 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. What is 1040x Your adjusted basis in the silo after the casualty is $26,000 ($25,000 - $1,000 - $4,000 + $6,000). What is 1040x 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). What is 1040x There are two limits on the deduction for casualty or theft loss of personal-use property. What is 1040x You figure these limits on Form 4684. What is 1040x $100 rule. What is 1040x   You must reduce each casualty or theft loss on personal-use property by $100. What is 1040x This rule applies after you have subtracted any reimbursement. What is 1040x 10% rule. What is 1040x   You must further reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. What is 1040x Apply this rule after you reduce each loss by $100. What is 1040x Adjusted gross income is on line 38 of Form 1040. What is 1040x Example. What is 1040x In June, you discovered that your house had been burglarized. What is 1040x Your loss after insurance reimbursement was $2,000. What is 1040x Your adjusted gross income for the year you discovered the burglary is $57,000. What is 1040x Figure your theft loss deduction as follows: 1. What is 1040x Loss after insurance $2,000 2. What is 1040x Subtract $100 100 3. What is 1040x Loss after $100 rule $1,900 4. What is 1040x Subtract 10% (. What is 1040x 10) × $57,000 AGI $5,700 5. What is 1040x 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). What is 1040x    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. What is 1040x See 10% Rule in Publication 547. What is 1040x When Loss Is Deductible Generally, you can deduct casualty losses that are not reimbursable only in the tax year in which they occur. What is 1040x You generally can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. What is 1040x However, losses in federally declared disaster areas are subject to different rules. What is 1040x See Disaster Area Losses , later, for an exception. What is 1040x 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. What is 1040x Leased property. What is 1040x   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. What is 1040x This is true even if the loss occurred or the liability was paid in a different year. What is 1040x You are not entitled to a deduction until your liability under the lease can be determined with reasonable accuracy. What is 1040x Your liability can be determined when a claim for recovery is settled, adjudicated, or abandoned. What is 1040x Example. What is 1040x Robert leased a tractor from First Implement, Inc. What is 1040x , for use in his farm business. What is 1040x The tractor was destroyed by a tornado in June 2012. What is 1040x The loss was not insured. What is 1040x First Implement billed Robert for the fair market value of the tractor on the date of the loss. What is 1040x Robert disagreed with the bill and refused to pay it. What is 1040x First Implement later filed suit in court against Robert. What is 1040x 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. What is 1040x Robert paid $20,000 in June 2013. What is 1040x He can claim the $20,000 as a loss on his 2013 tax return. What is 1040x Net operating loss (NOL). What is 1040x   If your deductions, including casualty or theft loss deductions, are more than your income for the year, you may have an NOL. What is 1040x An NOL can be carried back or carried forward and deducted from income in other years. What is 1040x See Publication 536 for more information on NOLs. What is 1040x Proof of Loss To deduct a casualty or theft loss, you must be able to prove that there was a casualty or theft. What is 1040x You must have records to support the amount you claim for the loss. What is 1040x Casualty loss proof. What is 1040x   For a casualty loss, your records should show all the following information. What is 1040x The type of casualty (car accident, fire, storm, etc. What is 1040x ) and when it occurred. What is 1040x That the loss was a direct result of the casualty. What is 1040x 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. What is 1040x Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. What is 1040x Theft loss proof. What is 1040x   For a theft loss, your records should show all the following information. What is 1040x When you discovered your property was missing. What is 1040x That your property was stolen. What is 1040x That you were the owner of the property. What is 1040x Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. What is 1040x Figuring a Gain A casualty or theft may result in a taxable gain. What is 1040x 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. What is 1040x You generally report your gain as income in the year you receive the reimbursement. What is 1040x However, depending on the type of property you receive, you may not have to report your gain. What is 1040x See Postponing Gain , later. What is 1040x 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. What is 1040x 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. What is 1040x Amount you receive. What is 1040x   The amount you receive includes any money plus the value of any property you receive, minus any expenses you have in obtaining reimbursement. What is 1040x It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. What is 1040x Example. What is 1040x A tornado severely damaged your barn. What is 1040x The adjusted basis of the barn was $25,000. What is 1040x Your insurance company reimbursed you $40,000 for the damaged barn. What is 1040x However, you had legal expenses of $2,000 to collect that insurance. What is 1040x Your insurance minus your expenses to collect the insurance is more than your adjusted basis in the barn, so you have a gain. What is 1040x 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. What is 1040x Some of these are discussed in the following paragraphs. What is 1040x Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes. What is 1040x You report the gain or deduct the loss on your tax return for the year you realize it. What is 1040x However, depending on the type of property you receive, you may not have to report your gain on the involuntary conversion. What is 1040x See Postponing Gain , later. What is 1040x Condemnation Condemnation is the process by which private property is legally taken for public use without the owner's consent. What is 1040x 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. What is 1040x The owner receives a condemnation award (money or property) in exchange for the property taken. What is 1040x A condemnation is a forced sale, the owner being the seller and the condemning authority being the buyer. What is 1040x Threat of condemnation. What is 1040x   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. What is 1040x Main home condemned. What is 1040x   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. What is 1040x For information on this exclusion, see Publication 523. What is 1040x 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. What is 1040x See Postponing Gain , later. What is 1040x (You cannot deduct a loss from the condemnation of your main home. What is 1040x ) More information. What is 1040x   For information on how to figure the gain or loss on condemned property, see chapter 1 in Publication 544. What is 1040x Also see Postponing Gain , later, to find out if you can postpone reporting the gain. What is 1040x 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. What is 1040x Livestock Losses Diseased livestock. What is 1040x   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. What is 1040x If the livestock were raised or purchased for resale, follow the rules for livestock discussed earlier under Farming Losses . What is 1040x Otherwise, figure the gain or loss from these conversions using the rules discussed under Determining Gain or Loss in chapter 8. What is 1040x If you replace the livestock, you may be able to postpone reporting the gain. What is 1040x See Postponing Gain below. What is 1040x Reporting dispositions of diseased livestock. What is 1040x   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. What is 1040x You must also include other information on this statement. What is 1040x See How To Postpone Gain , later, under Postponing Gain . What is 1040x Weather-related sales of livestock. What is 1040x   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. What is 1040x 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. What is 1040x Figure the gain or loss using the rules discussed under Determining Gain or Loss in chapter 8. What is 1040x If you replace the livestock, you may be able to postpone reporting the gain. What is 1040x See Postponing Gain below. What is 1040x Example. What is 1040x It is your usual business practice to sell five of your dairy animals during the year. What is 1040x This year you sold 20 dairy animals because of drought. What is 1040x The sale of 15 animals is treated as an involuntary conversion. What is 1040x    If you do not replace the livestock, you may be able to report the gain in the following year's income. What is 1040x This rule also applies to other livestock (including poultry). What is 1040x See Sales Caused by Weather-Related Conditions in chapter 3. What is 1040x 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. What is 1040x Treat the loss as a loss from an involuntary conversion. What is 1040x The loss equals the previously capitalized reforestation costs you had to duplicate on replanting. What is 1040x You deduct the loss on the return for the year the seedlings died. What is 1040x 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. What is 1040x Your basis in the new property is generally the same as your adjusted basis in the property it replaces. What is 1040x You must ordinarily report the gain on your stolen, destroyed, or other involuntarily converted property if you receive money or unlike property as reimbursement. What is 1040x 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. What is 1040x If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. What is 1040x To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. What is 1040x 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. What is 1040x Example 1. What is 1040x In 1985, you constructed a barn to store farm equipment at a cost of $20,000. What is 1040x In 1987, you added a silo to the barn at a cost of $15,000 to store grain. What is 1040x In May of this year, the property was worth $100,000. What is 1040x In June the barn and silo were destroyed by a tornado. What is 1040x At the time of the tornado, you had an adjusted basis of $0 in the property. What is 1040x You received $85,000 from the insurance company. What is 1040x You had a gain of $85,000 ($85,000 – $0). What is 1040x You spent $80,000 to rebuild the barn and silo. What is 1040x Since this is less than the insurance proceeds received, you must include $5,000 ($85,000 – $80,000) in your income. What is 1040x Example 2. What is 1040x In 1970, you bought a cabin in the mountains for your personal use at a cost of $18,000. What is 1040x You made no further improvements or additions to it. What is 1040x When a storm destroyed the cabin this January, the cabin was worth $250,000. What is 1040x You received $146,000 from the insurance company in March. What is 1040x You had a gain of $128,000 ($146,000 − $18,000). What is 1040x You spent $144,000 to rebuild the cabin. What is 1040x Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. What is 1040x Buying replacement property from a related person. What is 1040x   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). What is 1040x This rule applies to the following taxpayers. What is 1040x C corporations. What is 1040x Partnerships in which more than 50% of the capital or profits interest is owned by C corporations. What is 1040x 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. What is 1040x 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. What is 1040x If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. What is 1040x If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. What is 1040x Exception. What is 1040x   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. What is 1040x Related persons. What is 1040x   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. What is 1040x For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. What is 1040x Death of a taxpayer. What is 1040x   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. What is 1040x 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. What is 1040x Replacement Property You must buy replacement property for the specific purpose of replacing your property. What is 1040x Your replacement property must be similar or related in service or use to the property it replaces. What is 1040x You do not have to use the same funds you receive as reimbursement for your old property to acquire the replacement property. What is 1040x 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. What is 1040x Property you acquire by gift or inheritance does not qualify as replacement property. What is 1040x Owner-user. What is 1040x   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. What is 1040x 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. What is 1040x A grinding mill that replaces a tractor does not qualify. What is 1040x Neither does a breeding or draft animal that replaces a dairy cow. What is 1040x Soil or other environmental contamination. What is 1040x   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. What is 1040x Weather-related conditions. What is 1040x   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. What is 1040x Example. What is 1040x Each year you normally sell 25 cows from your beef herd. What is 1040x However, this year you had to sell 50 cows. What is 1040x 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. What is 1040x 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. What is 1040x Standing crop destroyed by casualty. What is 1040x   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. What is 1040x 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). What is 1040x 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. What is 1040x Timber loss. What is 1040x   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. What is 1040x If you bought the standing timber within the replacement period, you can postpone reporting the gain. What is 1040x Business or income-producing property located in a federally declared disaster area. What is 1040x   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. What is 1040x For more information, see Disaster Area Losses in Publication 547. What is 1040x Substituting replacement property. What is 1040x   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. What is 1040x This is true even if you acquire the other property within the replacement period. What is 1040x 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. What is 1040x Basis of replacement property. What is 1040x   You must reduce the basis of your replacement property (its cost) by the amount of postponed gain. What is 1040x In this way, tax on the gain is postponed until you dispose of the replacement property. What is 1040x Replacement Period To postpone reporting your gain, you must buy replacement property within a specified period of time. What is 1040x This is the replacement period. What is 1040x The replacement period begins on the date your property was damaged, destroyed, stolen, sold, or exchanged. What is 1040x 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. What is 1040x Example. What is 1040x You are a calendar year taxpayer. What is 1040x While you were on vacation, farm equipment that cost $2,200 was stolen from your farm. What is 1040x You discovered the theft when you returned to your farm on November 11, 2012. What is 1040x Your insurance company investigated the theft and did not settle your claim until January 5, 2013, when they paid you $3,000. What is 1040x You first realized a gain from the reimbursement for the theft during 2013, so you have until December 31, 2015, to replace the property. What is 1040x Main home in disaster area. What is 1040x   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. What is 1040x See Disaster Area Losses , later. What is 1040x Property in the Midwestern disaster areas. What is 1040x   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. What is 1040x This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Midwestern disaster areas. What is 1040x Property in the Kansas disaster area. What is 1040x   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. What is 1040x This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Kansas disaster area. What is 1040x Property in the Hurricane Katrina disaster area. What is 1040x   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. What is 1040x This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. What is 1040x Weather-related sales of livestock in an area eligible for federal assistance. What is 1040x   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. What is 1040x The IRS may extend the replacement period on a regional basis if the weather-related conditions continue for longer than 3 years. What is 1040x   For information on extensions of the replacement period because of persistent drought, see Notice 2006-82, 2006-39 I. What is 1040x R. What is 1040x B. What is 1040x 529, available at  www. What is 1040x irs. What is 1040x gov/irb/2006-39_IRB/ar11. What is 1040x html. What is 1040x 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. What is 1040x gov. What is 1040x Condemnation. What is 1040x   The replacement period for a condemnation begins on the earlier of the following dates. What is 1040x The date on which you disposed of the condemned property. What is 1040x The date on which the threat of condemnation began. What is 1040x 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. What is 1040x 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. What is 1040x Business or investment real property. What is 1040x   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. What is 1040x Extension. What is 1040x   You can apply for an extension of the replacement period. What is 1040x Send your written application to the Internal Revenue Service Center where you file your tax return. What is 1040x See your tax return instructions for the address. What is 1040x Include all the details about your need for an extension. What is 1040x Make your application before the end of the replacement period. What is 1040x 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. What is 1040x You will get an extension of the replacement period if you can show reasonable cause for not making the replacement within the regular period. What is 1040x How To Postpone Gain You postpone reporting your gain by reporting your choice on your tax return for the year you have the gain. What is 1040x You have the gain in the year you receive insurance proceeds or other reimbursements that result in a gain. What is 1040x Required statement. What is 1040x   You should attach a statement to your return for the year you have the gain. What is 1040x This statement should include all the following information. What is 1040x The date and details of the casualty, theft, or other involuntary conversion. What is 1040x The insurance or other reimbursement you received. What is 1040x How you figured the gain. What is 1040x Replacement property acquired before return filed. What is 1040x   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. What is 1040x The replacement property. What is 1040x The postponed gain. What is 1040x The basis adjustment that reflects the postponed gain. What is 1040x Any gain you are reporting as income. What is 1040x Replacement property acquired after return filed. What is 1040x   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. What is 1040x   You should then attach another statement to your return for the year in which you buy the replacement property. What is 1040x This statement should contain detailed information on the replacement property. What is 1040x 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. What is 1040x Include in the statement detailed information on the replacement property bought in that year. What is 1040x Reporting weather-related sales of livestock. What is 1040x   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. What is 1040x Evidence of the weather-related conditions that forced the sale or exchange of the livestock. What is 1040x The gain realized on the sale or exchange. What is 1040x The number and kind of livestock sold or exchanged. What is 1040x The number of livestock of each kind you would have sold or exchanged under your usual business practice. What is 1040x   Show all the following information and the preceding information on the return for the year in which you replace the livestock. What is 1040x The dates you bought the replacement property. What is 1040x The cost of the replacement property. What is 1040x Description of the replacement property (for example, the number and kind of the replacement livestock). What is 1040x Amended return. What is 1040x   You must file an amended return (Form 1040X) for the tax year of the gain in either of the following situations. What is 1040x You do not acquire replacement property within the replacement period, plus extensions. What is 1040x On this amended return, you must report the gain and pay any additional tax due. What is 1040x 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. What is 1040x On this amended return, you must report the part of the gain that cannot be postponed and pay any additional tax due. What is 1040x Disaster Area Losses Special rules apply to federally declared disaster area losses. What is 1040x 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. What is 1040x Stafford Disaster Relief and Emergency Assistance Act. What is 1040x It includes a major disaster or emergency declaration under the act. What is 1040x 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. What is 1040x fema. What is 1040x gov. What is 1040x This part discusses the special rules for when to deduct a disaster area loss and what tax deadlines may be postponed. What is 1040x For other special rules, see Disaster Area Losses in Publication 547. What is 1040x When to deduct the loss. What is 1040x   You generally must deduct a casualty loss in the year it occurred. What is 1040x 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. What is 1040x If you make this choice, the loss is treated as having occurred in the preceding year. What is 1040x    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. What is 1040x   You must make the choice to take your casualty loss for the disaster in the preceding year by the later of the following dates. What is 1040x The due date (without extensions) for filing your tax return for the tax year in which the disaster actually occurred. What is 1040x The due date (with extensions) for the return for the preceding tax year. What is 1040x Federal disaster relief grants. What is 1040x   Do not include post-disaster relief grants received under the Robert T. What is 1040x 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. What is 1040x Do not deduct casualty losses or medical expenses to the extent they are specifically reimbursed by these disaster relief grants. What is 1040x 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. What is 1040x Unemployment assistance payments under the Act are taxable unemployment compensation. What is 1040x Qualified disaster relief payments. What is 1040x   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. What is 1040x These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). What is 1040x No withholding applies to these payments. What is 1040x   Qualified disaster relief payments include payments you receive (regardless of the source) for the following expenses. What is 1040x Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a federally declared disaster. What is 1040x Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a federally declared disaster. What is 1040x (A personal residence can be a rented residence or one you own. What is 1040x ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a federally declared disaster. What is 1040x   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. What is 1040x    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. What is 1040x Qualified disaster mitigation payments. What is 1040x   Qualified disaster mitigation payments made under the Robert T. What is 1040x 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. What is 1040x These are payments you, as a property owner, receive to reduce the risk of future damage to your property. What is 1040x You cannot increase your basis in property, or take a deduction or credit, for expenditures made with respect to those payments. What is 1040x Sale of property under hazard mitigation program. What is 1040x   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. What is 1040x You report the gain or deduct the loss on your tax return for the year you realize it. What is 1040x (You cannot deduct a loss on personal-use property unless the loss resulted from a casualty, as discussed earlier. What is 1040x ) 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. What is 1040x See Postponing Gain , earlier, for the rules that apply. What is 1040x Other federal assistance programs. What is 1040x    For more information about other federal assistance programs, see Crop Insurance and Crop Disaster Payments and Feed Assistance and Payments in chapter 3 earlier. What is 1040x Postponed tax deadlines. What is 1040x   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. What is 1040x 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. What is 1040x   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). What is 1040x Go to http://www. What is 1040x irs. What is 1040x gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. What is 1040x Who is eligible. What is 1040x   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. What is 1040x Any individual whose main home is located in a covered disaster area (defined next). What is 1040x Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. What is 1040x Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered disaster area. What is 1040x 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. What is 1040x The main home or principal place of business does not have to be located in the covered disaster area. What is 1040x 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. What is 1040x The spouse on a joint return with a taxpayer who is eligible for postponements. What is 1040x 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. What is 1040x Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. What is 1040x Any other person determined by the IRS to be affected by a federally declared disaster. What is 1040x Covered disaster area. What is 1040x   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. What is 1040x Abatement of interest and penalties. What is 1040x   The IRS may abate the interest and penalties on the underpaid income tax for the length of any postponement of tax deadlines. What is 1040x 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. What is 1040x Form 4684. What is 1040x   Use this form to report your gains and losses from casualties and thefts. What is 1040x Form 4797. What is 1040x   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. What is 1040x 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. What is 1040x Form 8949. What is 1040x   Use this form to report gain from an involuntary conversion (other than from casualty or theft) of personal-use property. What is 1040x Schedule A (Form 1040). What is 1040x   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. What is 1040x Schedule D (Form 1040). What is 1040x   Use this form to carry over the following gains. What is 1040x Net gain shown on Form 4797 from an involuntary conversion of business property held for more than 1 year. What is 1040x Net gain shown on Form 4684 from the casualty or theft of personal-use property. What is 1040x    Also use this form to figure the overall gain or loss from transactions reported on Form 8949. What is 1040x Schedule F (Form 1040). What is 1040x   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. What is 1040x Prev  Up  Next   Home   More Online Publications
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LT 16 (Letter 2050) Frequently Asked Questions (FAQs)

What is the notice telling me?

Enforcement action may be taken to collect taxes you owe because you have not responded to previous notices sent to you on this matter.

What do I have to do?

Contact us to resolve your account. The letter includes a number of options available to you.

How much time do I have?

Contact us as soon as possible to avoid collection action, no later than 10 days from the date on the letter.

What happens if I don't pay?

Enforcement action including levy on your wages, bank accounts, federal payment, state tax refunds, or other income sources may result if your balance is not resolved. If you are unable to pay in full, a monthly payment plan may be available, or collection may be delayed if you are unable to pay due to financial hardship. Please be ready to discuss you income, expenses and assets owned if you feel that you are unable to pay; proof may be requested.

Who should I contact?

Contact us at the number shown at the top of the letter; the person who answers will be able to assist you.

What if I don't agree or have already taken corrective action?

If you do not agree with this notice, call us immediately at the number printed at the top of the notice. We will do our best to help you. If you called us about this matter before, but we did not correct the problem, you may want to contact the Office of the Taxpayer Advocate.

If you have already paid or arranged for an installment agreement, you should still call us at the number printed at the top of the notice to make sure your account reflects this.

Page Last Reviewed or Updated: 30-Jan-2014

The What Is 1040x

What is 1040x 6. What is 1040x   How To Get Tax Help Table of Contents Low Income Taxpayer Clinics Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. What is 1040x Free help with your tax return. What is 1040x   You can get free help preparing your return nationwide from IRS-certified volunteers. What is 1040x The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. What is 1040x The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. What is 1040x Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. What is 1040x In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. What is 1040x To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. What is 1040x gov, download the IRS2Go app, or call 1-800-906-9887. What is 1040x   As part of the TCE program, AARP offers the Tax-Aide counseling program. What is 1040x To find the nearest AARP Tax-Aide site, visit AARP's website at www. What is 1040x aarp. What is 1040x org/money/taxaide or call 1-888-227-7669. What is 1040x For more information on these programs, go to IRS. What is 1040x gov and enter “VITA” in the search box. What is 1040x Internet. What is 1040x    IRS. What is 1040x gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. What is 1040x Download the free IRS2Go app from the iTunes app store or from Google Play. What is 1040x Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. What is 1040x Check the status of your 2013 refund with the Where's My Refund? application on IRS. What is 1040x gov or download the IRS2Go app and select the Refund Status option. What is 1040x The IRS issues more than 9 out of 10 refunds in less than 21 days. What is 1040x Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. What is 1040x You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. What is 1040x The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. What is 1040x Use the Interactive Tax Assistant (ITA) to research your tax questions. What is 1040x No need to wait on the phone or stand in line. What is 1040x The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. What is 1040x When you reach the response screen, you can print the entire interview and the final response for your records. What is 1040x New subject areas are added on a regular basis. What is 1040x  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. What is 1040x gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. What is 1040x You can use the IRS Tax Map, to search publications and instructions by topic or keyword. What is 1040x The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. What is 1040x When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. What is 1040x Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. What is 1040x You can also ask the IRS to mail a return or an account transcript to you. What is 1040x Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. What is 1040x gov or by calling 1-800-908-9946. What is 1040x Tax return and tax account transcripts are generally available for the current year and the past three years. What is 1040x Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. What is 1040x Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. What is 1040x If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. What is 1040x Check the status of your amended return using Where's My Amended Return? Go to IRS. What is 1040x gov and enter Where's My Amended Return? in the search box. What is 1040x You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. What is 1040x It can take up to 3 weeks from the date you mailed it to show up in our system. What is 1040x Make a payment using one of several safe and convenient electronic payment options available on IRS. What is 1040x gov. What is 1040x Select the Payment tab on the front page of IRS. What is 1040x gov for more information. What is 1040x Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. What is 1040x Figure your income tax withholding with the IRS Withholding Calculator on IRS. What is 1040x gov. What is 1040x Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. What is 1040x Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. What is 1040x gov. What is 1040x Request an Electronic Filing PIN by going to IRS. What is 1040x gov and entering Electronic Filing PIN in the search box. What is 1040x Download forms, instructions and publications, including accessible versions for people with disabilities. What is 1040x Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. What is 1040x gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. What is 1040x An employee can answer questions about your tax account or help you set up a payment plan. What is 1040x Before you visit, check the Office Locator on IRS. What is 1040x gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. What is 1040x If you have a special need, such as a disability, you can request an appointment. What is 1040x Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. What is 1040x Apply for an Employer Identification Number (EIN). What is 1040x Go to IRS. What is 1040x gov and enter Apply for an EIN in the search box. What is 1040x Read the Internal Revenue Code, regulations, or other official guidance. What is 1040x Read Internal Revenue Bulletins. What is 1040x Sign up to receive local and national tax news and more by email. What is 1040x Just click on “subscriptions” above the search box on IRS. What is 1040x gov and choose from a variety of options. What is 1040x Phone. What is 1040x    You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. What is 1040x Download the free IRS2Go app from the iTunes app store or from Google Play. What is 1040x Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. What is 1040x gov, or download the IRS2Go app. What is 1040x Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. What is 1040x The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. What is 1040x Most VITA and TCE sites offer free electronic filing. What is 1040x Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. What is 1040x Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. What is 1040x Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. What is 1040x If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. What is 1040x The IRS issues more than 9 out of 10 refunds in less than 21 days. What is 1040x Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. What is 1040x Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. What is 1040x The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. What is 1040x Note, the above information is for our automated hotline. What is 1040x Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. What is 1040x Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. What is 1040x You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. What is 1040x It can take up to 3 weeks from the date you mailed it to show up in our system. What is 1040x Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). What is 1040x You should receive your order within 10 business days. What is 1040x Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. What is 1040x If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. What is 1040x Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. What is 1040x The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. What is 1040x These individuals can also contact the IRS through relay services such as the Federal Relay Service. What is 1040x Walk-in. What is 1040x   You can find a selection of forms, publications and services — in-person. What is 1040x Products. What is 1040x You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. What is 1040x Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. What is 1040x Services. What is 1040x You can walk in to your local TAC for face-to-face tax help. What is 1040x An employee can answer questions about your tax account or help you set up a payment plan. What is 1040x Before visiting, use the Office Locator tool on IRS. What is 1040x gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. What is 1040x Mail. What is 1040x   You can send your order for forms, instructions, and publications to the address below. What is 1040x You should receive a response within 10 business days after your request is received. What is 1040x Internal Revenue Service 1201 N. What is 1040x Mitsubishi Motorway Bloomington, IL 61705-6613    The Taxpayer Advocate Service Is Here to Help You. What is 1040x The Taxpayer Advocate Service (TAS) is your voice at the IRS. What is 1040x Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. What is 1040x   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. What is 1040x We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. What is 1040x You face (or your business is facing) an immediate threat of adverse action. What is 1040x You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. What is 1040x   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. What is 1040x Here's why we can help: TAS is an independent organization within the IRS. What is 1040x Our advocates know how to work with the IRS. What is 1040x Our services are free and tailored to meet your needs. What is 1040x We have offices in every state, the District of Columbia, and Puerto Rico. What is 1040x   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at Taxpayer Advocate, or call us toll-free at 1-877-777-4778. What is 1040x   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. What is 1040x If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. What is 1040x Low Income Taxpayer Clinics Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals and tax collection disputes. What is 1040x Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. What is 1040x Visit Taxpayer Advocate or see IRS Publication 4134, Low Income Taxpayer Clinic List. What is 1040x Prev  Up  Next   Home   More Online Publications