Form 4684 - Instructions For Form 4684 (Page 3 of 4) in pdf

damaged from a single casualty or

agencies, it is considered a

determining FMV are important

theft. If more than four items were lost

reimbursement.

elements in proving your loss.

•

or damaged, use additional sheets

A bonding company pays you for a

The appraised value of property

following the format of lines 1 through

theft loss, the payment is also

immediately after the casualty must be

considered a reimbursement.

adjusted (increased) for the effects of

Lump-sum reimbursement. If you

any general market decline that may

Use a separate Form 4684 through

have a casualty or theft loss of several

occur at the same time as the casualty

line 12 for each casualty or theft

assets at the same time and you

involving property not used in a trade or

or theft. For example, the value of all

receive a lump-sum reimbursement,

business or for income-producing

nearby property may become

you must divide the amount you receive

purposes.

depressed because it is in an area

among the assets according to the

where such occurrences are

Do not include any loss previously

FMV of each asset at the time of the

commonplace. This general decline in

deducted on an estate tax return.

loss.

market value is not part of the

If you are liable for casualty or theft

property’s decrease in FMV as a result

Grants, gifts, and other payments.

losses to property you lease from

of the casualty or theft.

Grants and other payments you receive

someone else, see Pub. 547.

to help you after a casualty are

Replacement cost or the cost of

Line 2

considered reimbursements only if they

repairs is not necessarily FMV.

must be used specifically to repair or

However, you may be able to use the

Cost or other basis usually means

replace your property. Such payments

cost of repairs to the damaged property

original cost plus improvements.

will reduce your casualty loss

as evidence of loss in value if:

Subtract any postponed gain from the

•

deduction. If there are no conditions on

The repairs are necessary to restore

sale of a previous main home. Special

how you have to use the money you

the property to the condition it was in

rules apply to property received as a

receive, it is not a reimbursement.

immediately before the casualty;

gift or inheritance. See Pub. 551, Basis

•

The amount spent for repairs is not

Use and occupancy insurance. If

of Assets, for details.

excessive;

insurance reimburses you for your loss

•

Line 3

The repairs only correct the damage

of business income, it does not reduce

caused by the casualty; and

Enter on this line the amount of

your casualty or theft loss. The

•

The value of the property after the

insurance or other reimbursement you

reimbursement is income, however,

repairs is not, as a result of the repairs,

received or expect to receive for each

and is taxed in the same manner as

more than the value of the property

property. Include your insurance

your business income.

immediately before the casualty.

coverage whether or not you are filing a

Line 4

To figure a casualty loss to real

claim for reimbursement. For example,

If you are entitled to an insurance

estate not used in a trade, business, or

your car worth $2,000 is totally

payment or other reimbursement for

for income-producing purposes,

destroyed in a collision. You are

any part of a casualty or theft loss but

measure the decrease in value of the

insured with a $500 deductible, but

you choose not to file a claim for the

property as a whole. All improvements,

decide not to report it to your insurance

loss, you cannot realize a gain from

such as buildings, trees, and shrubs,

company because you are afraid the

that payment or reimbursement.

are considered together as one item.

insurance company will cancel your

Therefore, figure the gain on line 4 by

Figure the loss separately for other

policy. In this case, enter $1,500 on this

subtracting your cost or other basis in

items. For example, figure the loss

line.

the property (line 2) only from the

separately for each piece of furniture.

If you expect to be reimbursed but

amount of reimbursement you actually

have not yet received payment, you

Line 15

received. Enter the result on line 4, but

must still enter the expected

If there is a net gain on this line:

do not enter less than zero.

•

reimbursement from the loss. If, in a

Combine your short-term gains with

If you filed a claim for reimbursement

later tax year, you determine with

your short-term losses, and enter the

but did not receive it until after the year

reasonable certainty that you will not be

net short-term gain or loss on Schedule

of the casualty or theft, include the gain

reimbursed for all or part of the loss,

D (Form 1040), line 4. Estates and

in your income in the year you received

you can deduct for that year the

trusts enter this amount on Schedule D

the reimbursement.

amount of the loss that is not

(Form 1041), line 2.

•

reimbursed.

Lines 5 and 6

Combine your long-term gains with

Types of reimbursements. Insurance

your long-term losses and enter the net

Fair Market Value (FMV) is the price at

is the most common way to be

long-term gain or loss on Schedule D

which the property would change hands

reimbursed for a casualty or theft loss,

(Form 1040), line 11, column (f).

between a willing buyer and a willing

but if:

Estates and trusts enter this amount on

seller, each having knowledge of the

•

Part of a Federal disaster loan under

Schedule D (Form 1041), line 7, column

relevant facts. The difference between

the Disaster Relief Act is forgiven, the

(f).

the FMV immediately before the

part you do not have to pay back is

The holding period for long-term

casualty or theft and the FMV

considered a reimbursement.

gains and losses is more than 1 year.

immediately after represents the

•

The person who leases your property

For short-term gains and losses, it is 1

decrease in FMV because of the

must make repairs or must repay you

year or less. To figure the holding

casualty or theft.

for any part of a loss, the repayment

period, begin counting on the day after

The FMV of property after a theft is

and the cost of the repairs are

you received the property and include

zero if the property is not recovered.

considered reimbursements.

the day the casualty or theft occurred.

•

A court awards you damages for a

FMV is generally determined by

Line 17

casualty or theft loss, the amount you

competent appraisal. The appraiser’s

are able to collect, minus lawyers’ fees

knowledge of sales of comparable

Estates and trusts figure adjusted gross

and other necessary expenses, is a

property about the same time as the

income in the same way as individuals,

reimbursement.

casualty or theft, knowledge of your

except that the costs of administration

•

You accept repairs, restoration, or

property before and after the

are allowed in figuring adjusted gross

cleanup services provided by relief

occurrence, and the methods of

income.

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Form 4684 - Instructions For Form 4684 Page 3

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