Instructions For Form 4684 - Casualties And Thefts

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If property is used partly in a trade or

A bonding company pays you for a

Replacement cost or the cost of

business and partly for personal

theft loss, the payment is also considered

repairs is not necessarily FMV. However,

purposes, such as a personal home with

a reimbursement.

you may be able to use the cost of repairs

a rental unit, figure the personal part in

to the damaged property as evidence of

Lump-sum reimbursement. If you have

Section A and the business part in

loss in value if:

a casualty or theft loss of several assets

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Section B.

The repairs are necessary to restore

at the same time and you receive a

the property to the condition it was in

lump-sum reimbursement, you must

Section A—Personal Use

immediately before the casualty,

divide the amount you receive among the

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Property

The amount spent for repairs is not

assets according to the fair market value

excessive,

Use a separate column for lines 1 through

of each asset at the time of the loss.

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The repairs only correct the damage

9 to show each item lost or damaged from

Grants, gifts, and other payments.

caused by the casualty, and

a single casualty or theft. If more than

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Grants and other payments you receive to

The value of the property after the

four items were lost or damaged, use

help you after a casualty are considered

repairs is not, as a result of the repairs,

additional sheets following the format of

reimbursements only if they must be used

more than the value of the property

lines 1 through 9.

specifically to repair or replace your

immediately before the casualty.

property. Such payments will reduce your

Use a separate Form 4684 through

To figure a casualty loss to real estate

casualty loss deduction. If there are no

line 12 for each casualty or theft involving

not used in a trade, business, or for

conditions on how you have to use the

property not used in a trade or business

income-producing purposes, measure the

money you receive, it is not a

or for income-producing purposes.

decrease in value of the property as a

reimbursement.

whole. All improvements, such as

Do not include any loss previously

Use and occupancy insurance. If

buildings, trees, and shrubs, are

deducted on an estate tax return.

insurance reimburses you for your loss of

considered together as one item. Figure

If you are liable for casualty or theft

business income, it does not reduce your

the loss separately for other items. For

losses to property you lease from

casualty or theft loss. The reimbursement

example, figure the loss separately for

someone else, see Pub. 547.

is income, and is taxed in the same

each piece of furniture.

manner as your business income.

Line 2

Line 11

Line 4

Cost or other basis usually means original

If your loss arose in the Hurricane Katrina

If you are entitled to an insurance

cost plus improvements. Subtract any

disaster area after August 24, 2005, and

payment or other reimbursement for any

postponed gain from the sale of a

was caused by Hurricane Katrina, you do

part of a casualty or theft loss but you

previous main home. Special rules apply

not have to reduce your loss by $100.

choose not to file a claim for the loss, you

to property received as a gift or

Enter zero on this line. Qualifying losses

cannot realize a gain from that payment

inheritance. See Pub. 551, Basis of

include losses from flooding or other

or reimbursement. Therefore, figure the

Assets, for details.

casualty, and from theft, that arose in the

gain on line 4 by subtracting your cost or

Hurricane Katrina disaster are and were

Line 3

other basis in the property (line 2) only

caused by Hurricane Katrina. The

from the amount of reimbursement you

Hurricane Katrina disaster area

Enter on this line the amount of insurance

actually received. Enter the result on line

includes the states of Alabama, Florida,

or other reimbursement you received or

4, but do not enter less than zero.

Louisiana, and Mississippi.

expect to receive for each property.

Include your insurance coverage whether

If you filed a claim for reimbursement

Line 15

or not you are filing a claim for

but did not receive it until after the year of

If line 14 is more than line 13:

reimbursement. For example, your car

the casualty or theft, include the gain in

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Combine your short-term gains with

worth $2,000 is totally destroyed in a

your income in the year you received the

your short-term losses and enter the net

collision. You are insured with a $500

reimbursement.

short-term gain or (loss) on Schedule D

deductible, but decide not to report it to

Lines 5 and 6

(Form 1040), line 4. Estates and trusts

your insurance company because you are

enter this amount on Schedule D (Form

afraid the insurance company will cancel

Fair market value (FMV) is the price at

1041), line 2.

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

which the property would be sold between

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Combine your long-term gains with

this line.

a willing buyer and a willing seller, each

your long-term losses and enter the net

having knowledge of the relevant facts.

If you expect to be reimbursed but

long-term gain or (loss) on Schedule D

The difference between the FMV

have not yet received payment, you must

(Form 1040), line 11. Estates and trusts

immediately before the casualty or theft

still enter the expected reimbursement

enter this amount on Schedule D (Form

and the FMV immediately after represents

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

1041), line 7.

the decrease in FMV because of the

determine with reasonable certainty that

casualty or theft.

The holding period for long-term gains

you will not be reimbursed for all or part of

and losses is more than 1 year. For

The FMV of property after a theft is

the loss, you can deduct for that year the

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

zero if the property is not recovered.

amount of the loss that is not reimbursed.

less. To figure the holding period, begin

FMV is generally determined by a

counting on the day after you received the

Types of reimbursements. Insurance is

competent appraisal. The appraiser’s

property and include the day the casualty

the most common way to be reimbursed

knowledge of sales of comparable

or theft occurred.

for a casualty or theft loss, but if:

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property about the same time as the

Part of a federal disaster loan is

Line 19

casualty or theft, knowledge of your

forgiven, the part you do not have to pay

property before and after the occurrence,

Estates and trusts figure adjusted gross

back is considered a reimbursement.

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and the methods of determining FMV are

income in the same way as individuals,

The person who leases your property

important elements in proving your loss.

except that the costs of administration are

must make repairs or must repay you for

allowed in figuring adjusted gross income.

any part of a loss, the repayment and the

The appraised value of property

cost of the repairs are considered

immediately after the casualty must be

Section B—Business and

reimbursements.

adjusted (increased) for the effects of any

Income-Producing Property

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A court awards you damages for a

general market decline that may occur at

Use a separate column of Part I, lines 22

casualty or theft loss, the amount you are

the same time as the casualty or theft.

through 30, to show each item lost or

able to collect, minus lawyers’ fees and

For example, the value of all nearby

damaged from a single casualty or theft. If

other necessary expenses, is a

property may become depressed

more than four items were lost or

reimbursement.

because it is in an area where such

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damaged, use additional sheets following

You accept repairs, restoration, or

occurrences are commonplace. This

the format of Part I, lines 22 through 30.

cleanup services provided by relief

general decline in market value is not part

agencies, it is considered a

of the property’s decrease in FMV as a

Use a separate Form 4684, Section B,

reimbursement.

result of the casualty or theft.

Part I, for each casualty or theft involving

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

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