Instructions For Form 4684 - Casualties And Thefts

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Hurricane Rita disaster area after

able to collect, minus lawyers’ fees and

property may become depressed

September 22, 2005, or

other necessary expenses, is a

because it is in an area where such

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Hurricane Wilma disaster area after

reimbursement.

occurrences are commonplace. This

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October 22, 2005,

You accept repairs, restoration, or

general decline in market value is not part

and were caused by that particular

cleanup services provided by relief

of the property’s decrease in FMV as a

hurricane.

agencies, it is considered a

result of the casualty or theft.

reimbursement.

Use Section B to figure casualty or

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Replacement cost or the cost of

A bonding company pays you for a

theft gains and losses for property that is

repairs is not necessarily FMV. However,

theft loss, the payment is also considered

used in a trade or business or for

you may be able to use the cost of repairs

a reimbursement.

income-producing purposes.

to the damaged property as evidence of

Lump-sum reimbursement. If you have

If property is used partly in a trade or

loss in value if:

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a casualty or theft loss of several assets

business and partly for personal

The repairs are necessary to restore

at the same time and you receive a

purposes, such as a personal home with

the property to the condition it was in

lump-sum reimbursement, you must

a rental unit, figure the personal part in

immediately before the casualty,

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divide the amount you receive among the

Section A and the business part in

The amount spent for repairs is not

assets according to the fair market value

Section B.

excessive,

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of each asset at the time of the loss.

The repairs only correct the damage

Section A—Personal Use

caused by the casualty, and

Grants, gifts, and other payments.

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Property

The value of the property after the

Grants and other payments you receive to

Use a separate column for lines 1 through

repairs is not, as a result of the repairs,

help you after a casualty are considered

9 to show each item lost or damaged from

more than the value of the property

reimbursements only if they must be used

a single casualty or theft. If more than

immediately before the casualty.

specifically to repair or replace your

four items were lost or damaged, use

property. Such payments will reduce your

To figure a casualty loss to real estate

additional sheets following the format of

casualty loss deduction. If there are no

not used in a trade, business, or for

lines 1 through 9.

conditions on how you have to use the

income-producing purposes, measure the

money you receive, it is not a

Use a separate Form 4684 through

decrease in value of the property as a

reimbursement.

line 12 for each casualty or theft involving

whole. All improvements, such as

property not used in a trade or business

Use and occupancy insurance. If

buildings, trees, and shrubs, are

or for income-producing purposes.

insurance reimburses you for your loss of

considered together as one item. Figure

Do not include any loss previously

business income, it does not reduce your

the loss separately for other items. For

deducted on an estate tax return.

casualty or theft loss. The reimbursement

example, figure the loss separately for

is income, and is taxed in the same

each piece of furniture.

If you are liable for casualty or theft

manner as your business income.

losses to property you lease from

Line 11

someone else, see Pub. 547.

Line 4

If your loss arose in the:

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Line 2

If you are entitled to an insurance

Hurricane Katrina disaster area after

payment or other reimbursement for any

Cost or other basis usually means original

August 24, 2005,

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part of a casualty or theft loss but you

cost plus improvements. Subtract any

Hurricane Rita disaster area after

choose not to file a claim for the loss, you

postponed gain from the sale of a

September 22, 2005, or

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cannot realize a gain from that payment

previous main home. Special rules apply

Hurricane Wilma disaster area after

or reimbursement. Therefore, figure the

to property received as a gift or

October 22, 2005,

gain on line 4 by subtracting your cost or

inheritance. See Pub. 551, Basis of

and was caused by that particular

other basis in the property (line 2) only

Assets, for details.

hurricane, you do not have to reduce your

from the amount of reimbursement you

loss by $100. Enter zero on this line.

Line 3

actually received. Enter the result on line

Qualifying losses include losses from

Enter on this line the amount of insurance

4, but do not enter less than zero.

flooding or other casualty, and from theft,

or other reimbursement you received or

that arose in these hurricane disaster

If you filed a claim for reimbursement

expect to receive for each property.

areas and were caused by these

but did not receive it until after the year of

Include your insurance coverage whether

particular hurricanes.

the casualty or theft, include the gain in

or not you are filing a claim for

your income in the year you received the

The Hurricane Katrina disaster area

reimbursement. For example, your car

reimbursement.

includes the states of Alabama, Florida,

worth $2,000 is totally destroyed in a

Louisiana, and Mississippi. The

collision. You are insured with a $500

Lines 5 and 6

Hurricane Rita disaster area includes

deductible, but decide not to report it to

Fair market value (FMV) is the price at

the states of Louisiana and Texas. The

your insurance company because you are

which the property would be sold between

Hurricane Wilma disaster area includes

afraid the insurance company will cancel

a willing buyer and a willing seller, each

the state of Florida.

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

having knowledge of the relevant facts.

this line.

The difference between the FMV

Line 15

If you expect to be reimbursed but

immediately before the casualty or theft

If line 14 is more than line 13:

have not yet received payment, you must

and the FMV immediately after represents

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Combine your short-term gains with

still enter the expected reimbursement

the decrease in FMV because of the

your short-term losses and enter the net

from the loss. If, in a later tax year, you

casualty or theft.

short-term gain or (loss) on Schedule D

determine with reasonable certainty that

The FMV of property after a theft is

(Form 1040), line 4. Estates and trusts

you will not be reimbursed for all or part of

zero if the property is not recovered.

enter this amount on Schedule D (Form

the loss, you can deduct for that year the

1041), line 2.

FMV is generally determined by a

amount of the loss that is not reimbursed.

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Combine your long-term gains with

competent appraisal. The appraiser’s

Types of reimbursements. Insurance is

your long-term losses and enter the net

knowledge of sales of comparable

the most common way to be reimbursed

long-term gain or (loss) on Schedule D

property about the same time as the

for a casualty or theft loss, but if:

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(Form 1040), line 11. Estates and trusts

casualty or theft, knowledge of your

Part of a federal disaster loan is

enter this amount on Schedule D (Form

property before and after the occurrence,

forgiven, the part you do not have to pay

1041), line 7.

and the methods of determining FMV are

back is considered a reimbursement.

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important elements in proving your loss.

The person who leases your property

The holding period for long-term gains

must make repairs or must repay you for

The appraised value of property

and losses is more than 1 year. For

any part of a loss, the repayment and the

immediately after the casualty must be

short-term gains and losses, it is 1 year or

cost of the repairs are considered

adjusted (increased) for the effects of any

less. To figure the holding period, begin

reimbursements.

general market decline that may occur at

counting on the day after you received the

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A court awards you damages for a

the same time as the casualty or theft.

property and include the day the casualty

casualty or theft loss, the amount you are

For example, the value of all nearby

or theft occurred.

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Instructions For Form 4684 - Casualties And Thefts - 2005 Page 3

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