Instructions For Form 4684 - Casualties And Thefts

service or use to the home or its contents

estimate your loss, you can elect to

Disaster Losses

is treated as similar or related in service

deduct the loss as:

•

A disaster loss is a loss that occurred in

or use to that single item of property.

A casualty loss to personal use

an area determined by the President of

Therefore, you can choose to recognize

property on Form 4684, or

•

the United States to warrant federal

gain only to the extent the insurance

An ordinary loss (miscellaneous

disaster assistance.

proceeds treated as received for that

itemized deduction) on Schedule A (Form

single item of property exceed the cost of

1040), Itemized Deductions, line 22. You

You can elect to deduct a disaster loss

the replacement property.

cannot elect the ordinary loss deduction if

in the tax year immediately prior to the tax

3. If you choose to postpone any gain

any part of the deposits related to the loss

year in which the disaster occurred as

from the receipt of insurance or other

is federally insured. The maximum

long as the loss would otherwise be

reimbursement for your main home or any

amount you can claim is $20,000

allowed as a deduction in the tax year it

of its contents, the period in which you

($10,000 if you are married filing

occurred.

must purchase replacement property is

separately). Your deduction is reduced by

This election must be made by filing

extended until 4 years after the end of the

any expected state insurance proceeds

your return or amended return for the

first tax year in which any part of the gain

and is subject to the 2% adjusted gross

prior year, and claiming your disaster loss

is realized. However, the 4-year period is

income limit.

on it, by the later of:

•

extended to 5 years if your main home or

If you elect to deduct the estimated

The due date for filing your original

any of its contents were located in the:

loss as a casualty loss or as an ordinary

return (without extensions) for the tax

a. New York Liberty Zone (as defined

loss, you cannot claim the same loss as a

year in which the disaster actually

in section 1400L(h)) and that property

nonbusiness bad debt. If the estimated

occurred, or

•

was converted as a result of the terrorist

loss deducted is less than the actual loss,

The due date for filing your original

attacks on September 11, 2001, in the

you can claim the difference as a

return (including extensions) for the tax

New York Liberty Zone, but only if

nonbusiness bad debt for the year in

year immediately prior to the tax year in

substantially all of the use of the

which the final determination of the loss

which the disaster actually occurred.

replacement property is in the city of

occurs. A nonbusiness bad debt is

You can revoke your election within 90

New York, New York.

deducted on Schedule D (Form 1040),

days after making it by returning to the

b. Hurricane Katrina disaster area (as

Capital Gains and Losses, as a

IRS any refund or credit you received

defined in the instructions for line 11) and

short-term capital loss.

from the election. If you revoke your

that property was converted after August

If you are a 1% or more owner or an

election before receiving a refund, you

24, 2005, as a result of Hurricane Katrina,

officer of the financial institution, or are

must repay the refund within 30 days after

but only if substantially all of the use of

related to any such owner or officer, you

receiving it.

the replacement property is in that

cannot deduct the loss as a casualty loss

On the return on which you claim the

disaster area.

or as an ordinary loss. See Pub. 550,

disaster loss, specify the date(s) of the

Investment Income and Expenses, for the

disaster and the city, town, county or

Example. Your main home and its

definition of “related.”

parish, and state in which the damaged or

contents were completely destroyed in

If you elect to deduct the loss as a

destroyed property was located.

2005 by a tornado in a Presidentially

casualty loss or as an ordinary loss and

declared disaster area. In 2005, you

To determine the amount to deduct for

you have more than one account in the

received insurance proceeds of $200,000

a disaster loss, you must take into

same financial institution, you must

for the home, $25,000 for unscheduled

account as reimbursements any benefits

include all your accounts. Once you make

personal property in your home, $5,000

you received from federal or state

the election, you cannot change it without

for jewelry, and $10,000 for a stamp

programs to restore your property.

permission from the IRS. See Notice

collection. The jewelry and stamp

89-28, 1989-1 C.B. 667, for more details.

If your home was located in a disaster

collection were kept in your home and

area and your state or local government

To elect to deduct the loss as a

were scheduled property on your

ordered you to tear it down or move it

casualty loss, complete Form 4684 as

insurance policy. No gain is recognized

because it was no longer safe to use as a

follows: On line 1, enter the name of the

on the $25,000 you received for the

home, the loss in value because it is no

financial institution and “Insolvent

unscheduled personal property. If you

longer safe is treated as a disaster loss.

Financial Institution.” Skip lines 2 through

reinvest the remaining proceeds of

The order for you to tear down or move

9. Enter the amount of the loss on line 10,

$215,000 in a replacement home, any

the home must have been issued within

and complete the rest of Section A.

type of replacement contents (whether

120 days after the area was officially

If, in a later year, you recover an

scheduled or unscheduled), or both, you

declared a disaster area.

amount you deducted as a loss, you may

can elect to postpone any gain on your

For purposes of figuring the disaster

have to include in your income the

home, jewelry, or stamp collection. If you

loss, use the value of your home before

amount recovered for that year. For

reinvest less than $215,000, any gain is

you moved it or tore it down as its fair

details, see Recoveries in Pub. 525,

recognized only to the extent $215,000

market value (FMV) after the casualty.

Taxable and Nontaxable Income.

exceeds the amount you reinvest in a

replacement home, any type of

Gains Realized on Homes

replacement contents (whether scheduled

Specific Instructions

or unscheduled), or both. To postpone

in Disaster Areas

gain, you must purchase the replacement

The following rules apply if your main

property before 2010.Your basis in the

Which Sections To

home was located in an area declared by

replacement property equals its cost

the President of the United States to

decreased by the amount of any

Complete

warrant federal assistance as the result of

postponed gain.

a disaster, and the home or any of its

Use Section A to figure casualty or theft

For details on how to postpone gain,

contents were damaged or destroyed due

gains and losses for property that is not

see Pub. 547.

to the disaster. These rules also apply to

used in a trade or business or for

renters who receive insurance proceeds

income-producing purposes.

for damaged or destroyed property in a

Special Treatment for

Nonbusiness casualty or theft losses

rented home that is their main home.

are deductible only to the extent that the

Losses on Deposits in

1. No gain is recognized on any

amount of the loss from each separate

Insolvent or Bankrupt

insurance proceeds received for

casualty or theft is more than $100 and

unscheduled personal property that was

the total amount of all losses (as so

Financial Institutions

part of the contents of the home.

reduced) during the year is more than

2. Any other insurance proceeds you

If you are an individual who incurred a

10% of adjusted gross income (Form

receive for the home or its contents are

loss from a deposit in a bank, credit

1040, line 38). However, these limits do

treated as received for a single item of

union, or other financial institution

not apply to losses that arose in the:

•

property, and any replacement property

because of the bankruptcy or insolvency

Hurricane Katrina disaster area after

you purchase that is similar or related in

of that institution and you can reasonably

August 24, 2005,

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Instructions For Form 4684 - Casualties And Thefts - 2005 Page 2

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