Instructions For Form 4684 - Casualties And Thefts

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Department of the Treasury

Internal Revenue Service

Instructions for Form 4684

Casualties and Thefts

Section references are to the Internal Revenue Code.

you may have to pay tax on it, or you

For details on how to postpone the

General Instructions

may be able to postpone the gain.

gain, see Pub. 547, Casualties,

Disasters, and Thefts.

Do not report the gain on damaged,

A Change To Note

If your main home was located in a

destroyed, or stolen property if you

An extended replacement period of 5

Presidentially declared disaster area,

receive property that is similar or

years may apply for postponing gain on

and that home or any of its contents

related to it in service or use. Your

property in the New York Liberty Zone

were damaged or destroyed due to the

basis in the new property is the same

(as defined in section 1400L(h)) that

disaster, special rules apply. See Gains

as your basis in the old property.

was converted because of the

Realized on Homes in Disaster Areas

September 11, 2001, terrorist attacks.

Any tangible replacement property

on page 2.

held for use in a trade or business is

See Gains Realized on Property in

If you had property in the New York

the New York Liberty Zone on page 2.

treated as similar or related in service

Liberty Zone (as defined in section

or use to property held for use in a

1400L(h)) that was converted because

Purpose of Form

trade or business or for investment if:

of the September 11, 2001, terrorist

•

The property you are replacing was

Use Form 4684 to report gains and

attacks, special rules may apply. See

damaged or destroyed in a disaster and

losses from casualties and thefts.

Gains Realized on Property in the

•

The area in which the property was

Attach Form 4684 to your tax return.

New York Liberty Zone on page 2.

damaged or destroyed was declared by

Losses You May Deduct

the President of the United States to

When To Deduct a Loss

warrant Federal assistance because of

You may deduct losses from fire, storm,

Deduct the part of your casualty or theft

that disaster.

shipwreck, or other casualty, or theft

loss that is not reimbursable in the tax

Generally, you must recognize the

(for example, larceny, embezzlement,

year the casualty occurred or the theft

gain if you receive unlike property or

and robbery).

was discovered. However, a disaster

money as reimbursement. But you

loss and a loss from deposits in

If your property is covered by

generally can choose to postpone all or

insolvent or bankrupt financial

insurance, you must file a timely

part of the gain if, within 2 years of the

institutions may be treated differently.

insurance claim for reimbursement of

end of the first tax year in which any

See Disaster Losses below and

your loss. Otherwise, you cannot

part of the gain is realized, you

Special Treatment for Losses on

deduct the loss as a casualty or theft

purchase:

Deposits in Insolvent or Bankrupt

loss. However, the part of the loss that

•

Property similar or related in service

Financial Institutions on page 2.

is not covered by insurance is still

or use to the damaged, destroyed, or

deductible.

If you are not sure whether part of

stolen property or

•

your casualty or theft loss will be

Related expenses. The related

A controlling interest (at least 80%) in

reimbursed, do not deduct that part

expenses you have due to a casualty or

a corporation owning such property.

until the tax year when you become

theft, such as expenses for the

To postpone all of the gain, the cost

reasonably certain that it will not be

treatment of personal injuries or for the

of the replacement property must be

reimbursed.

rental of a car, are not deductible as

equal to or more than the

casualty or theft losses.

If you are reimbursed for a loss you

reimbursement you received for your

deducted in an earlier year, include the

Costs for protection against future

property. If the cost of the replacement

reimbursement in your income in the

casualties are not deductible but should

property is less than the reimbursement

year you received it, but only to the

be capitalized as permanent

received, you must recognize the gain

extent the deduction reduced your tax

improvements. An example would be

to the extent the reimbursement

in an earlier year.

the cost of a levee to stop flooding.

exceeds the cost of the replacement

property.

See Pub. 547 for special rules on

Losses You May Not

when to deduct losses from casualties

If the replacement property or stock

and thefts to leased property.

Deduct

is acquired from a related person, gain

•

generally cannot be postponed by:

Money or property misplaced or lost.

Disaster Losses

•

Corporations (other than S

Breakage of china, glassware,

A disaster loss is a loss that occurred in

corporations);

furniture, and similar items under

•

an area determined by the President of

normal conditions.

Partnerships more than 50% owned

•

the United States to warrant Federal

Progressive damage to property

by one or more corporations (other than

disaster assistance.

(buildings, clothes, trees, etc.) caused

S corporations); or

•

by termites, moths, other insects, or

You may elect to deduct a disaster

All other taxpayers, unless the

disease.

loss in the tax year immediately prior to

aggregate realized gains on the

the tax year in which the disaster

involuntarily converted property are

Gain on Reimbursement

occurred as long as the loss would

$100,000 or less for the tax year. (This

otherwise be allowed as a deduction in

rule applies to partnerships and S

If the amount you receive in insurance

the tax year it occurred.

corporations at both the entity and

or other reimbursement is more than

partner or shareholder level.)

the cost or other basis of the property,

This election must be made by filing

you have a gain. If you have a gain,

For details, see section 1033(i).

your return or amended return for the

Cat. No. 12998Z

Instructions For Form 4684 - Casualties And Thefts - 2002

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