Instructions For Form 4684 - Casualties And Thefts

prior year, and claiming your disaster

for that single item of property exceed

Special Treatment for

loss on it, by the later of:

the cost of the replacement property.

•

Losses on Deposits in

If you choose to postpone any gain

The due date for filing your original

from the receipt of insurance or other

return (without extensions) for the tax

Insolvent or Bankrupt

year in which the disaster actually

reimbursement for your main home or

Financial Institutions

occurred or

any of its contents, the period in which

•

you must purchase replacement

The due date for filing your original

If you are an individual who incurred a

property is extended until 4 years after

return (including extensions) for the tax

loss from a deposit in a bank, credit

the end of the first tax year in which any

year immediately prior to the tax year in

union, or other financial institution

part of the gain is realized. However,

which the disaster actually occurred.

because it became insolvent or

the 4-year period is extended to 5 years

You may revoke your election within

bankrupt and you can reasonably

if your main home or any of its contents

90 days after making it by returning to

estimate your loss, you can elect to

were located in the New York Liberty

the IRS any refund or credit you

deduct the loss as:

•

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

received from the election. If you

A casualty loss to personal use

and substantially all of the use of the

revoke your election before receiving a

property on Form 4684 or

replacement property is in the city of

•

refund, you must repay the refund

An ordinary loss (miscellaneous

New York, New York.

within 30 days after receiving it.

itemized deduction) on Schedule A

Example. Your main home and its

(Form 1040), line 22. The maximum

On the return on which you claim the

contents were completely destroyed in

amount you can claim is $20,000

disaster loss, specify the date(s) of the

2002 by a fire in a Presidentially

($10,000 if you are married filing

disaster and the city, town, county, and

declared disaster area. In 2002, you

separately). Your deduction is reduced

state in which the damaged or

received insurance proceeds of

by any expected state insurance

destroyed property was located.

$200,000 for the home, $25,000 for

proceeds and is subject to the 2% limit.

unscheduled personal property in your

Note: To determine the amount to

If you elect, you can wait until the

home, $5,000 for jewelry, and $10,000

deduct for a disaster loss, you must

year of final determination of the actual

for a stamp collection. The jewelry and

take into account as reimbursements

loss and treat that amount as a

stamp collection were kept in your

any benefits you received from Federal

nonbusiness bad debt. A nonbusiness

home and were scheduled property on

or state programs to restore your

bad debt is deducted on Schedule D

your insurance policy. No gain is

property.

(Form 1040) as a short-term capital

recognized on the $25,000 you

loss.

If your home was located in a

received for the unscheduled personal

disaster area and your state or local

If you are a 1% or more owner or an

property. If you reinvest the remaining

government ordered you to tear it down

officer of the financial institution, or are

proceeds of $215,000 in a replacement

or move it because it was no longer

related to any such owner or officer,

home, any type of replacement

safe to use as a home, the loss in value

you cannot deduct the loss as a

contents (whether scheduled or

because it is no longer safe is treated

casualty loss or as an ordinary loss.

unscheduled), or both, you can elect to

as a disaster loss. The order for you to

See Pub. 550, Investment Income and

postpone any gain on your home,

tear down or move the home must have

Expenses, for the definition of “related.”

jewelry, or stamp collection. If you

been issued within 120 days after the

reinvest less than $215,000, any gain is

You cannot elect the ordinary loss

area was officially declared a disaster

recognized only to the extent $215,000

deduction if any part of the deposits

area.

exceeds the amount you reinvest in a

related to the loss is federally insured.

replacement home, any type of

For purposes of figuring the disaster

If you elect to deduct the loss as a

replacement contents (whether

loss, use the value of your home before

casualty loss or as an ordinary loss and

scheduled or unscheduled), or both. To

you moved it or tore it down as its fair

you have more than one account in the

postpone gain, you must purchase the

market value (FMV) after the casualty.

same financial institution, you must

replacement property before 2007.

include all your accounts. Once you

Your basis in the replacement property

Gains Realized on

make the election, you cannot change it

equals its cost decreased by the

without permission from the IRS.

Homes in Disaster Areas

amount of any postponed gain.

To elect to deduct the loss as a

For details on how to postpone gain,

The following rules apply if your main

casualty loss, complete Form 4684 as

see Pub. 547.

home was located in an area declared

follows: On line 1, enter the name of

by the President of the United States to

the financial institution and write

Gains Realized on

warrant Federal assistance as the

“Insolvent Financial Institution.” Skip

result of a disaster, and the home or

Property in the New York

lines 2 through 9. Enter the amount of

any of its contents were damaged or

the loss on line 10, and complete the

destroyed due to the disaster. These

Liberty Zone

rest of Section A.

rules also apply to renters who receive

If you choose to postpone any gain on

If, in a later year, you recover an

insurance proceeds for damaged or

property located in the New York

amount you deducted as a loss, you

destroyed property in a rented home

Liberty Zone (as defined in section

may have to include in your income the

that is their main home.

•

1400L(h)) that was converted because

amount recovered for that year. For

No gain is recognized on any

of the terrorist attacks on September

details, see Recoveries in Pub. 525,

insurance proceeds received for

11, 2001, the period in which you must

Taxable and Nontaxable Income.

unscheduled personal property that

purchase replacement property may be

was part of the contents of the home.

•

extended until 5 years after the end of

Any other insurance proceeds you

the first tax year in which any part of

receive for the home or its contents is

Specific Instructions

the gain is realized. However, the

treated as received for a single item of

5-year period applies only if

property, and any replacement property

substantially all of the use of the

Which Sections To

you purchase that is similar or related

replacement property is in the city of

in service or use to the home or its

Complete

New York, New York. In all other cases,

contents is treated as similar or related

the normal replacement period rules

in service or use to that single item of

Use Section A to figure casualty or

apply.

property. Therefore, you can choose to

theft gains and losses for property that

recognize gain only to the extent the

For details on how to postpone gain,

is not used in a trade or business or for

insurance proceeds treated as received

see Pub. 547.

income-producing purposes.

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Instructions For Form 4684 - Casualties And Thefts - 2002 Page 2

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