Instructions For Form 4684 - Casualties And Thefts

Nonbusiness casualty or theft losses

reimbursed for a casualty or theft loss,

casualty or theft and the FMV

are deductible only to the extent that

but if:

immediately after represents the

•

the amount of each separate casualty

Part of a Federal disaster loan under

decrease in FMV because of the

loss is more than $100 and the total

the Disaster Relief Act is forgiven, the

casualty or theft.

amount of all losses during the year is

part you do not have to pay back is

The FMV of property after a theft is

more than 10% of adjusted gross

considered a reimbursement.

zero if the property is not recovered.

•

income (line 36 of Form 1040).

The person who leases your property

FMV is generally determined by a

must make repairs or must repay you

Use Section B to figure casualty or

competent appraisal. The appraiser’s

for any part of a loss, the repayment

theft gains and losses for property that

knowledge of sales of comparable

and the cost of the repairs are

is used in a trade or business or for

property about the same time as the

considered reimbursements.

income-producing purposes.

•

casualty or theft, knowledge of your

A court awards you damages for a

If property is used partly in a trade or

property before and after the

casualty or theft loss, the amount you

business and partly for personal

occurrence, and the methods of

are able to collect, minus lawyers’ fees

purposes, such as a personal home

determining FMV are important

and other necessary expenses, is a

with a rental unit, figure the personal

elements in proving your loss.

reimbursement.

•

part in Section A and the business part

The appraised value of property

You accept repairs, restoration, or

in Section B.

immediately after the casualty must be

cleanup services provided by relief

adjusted (increased) for the effects of

agencies, it is considered a

Section A—Personal Use

any general market decline that may

reimbursement.

Property

•

occur at the same time as the casualty

A bonding company pays you for a

or theft. For example, the value of all

Use a separate column for lines 1

theft loss, the payment is also

nearby property may become

through 9 to show each item lost or

considered a reimbursement.

depressed because it is in an area

damaged from a single casualty or

Lump-sum reimbursement. If you

where such occurrences are

theft. If more than four items were lost

have a casualty or theft loss of several

commonplace. This general decline in

or damaged, use additional sheets

assets at the same time and you

following the format of lines 1 through

market value is not part of the

receive a lump-sum reimbursement,

property’s decrease in FMV as a result

you must divide the amount you receive

of the casualty or theft.

Use a separate Form 4684 through

among the assets according to the

Replacement cost or the cost of

line 12 for each casualty or theft

FMV of each asset at the time of the

repairs is not necessarily FMV.

involving property not used in a trade or

loss.

However, you may be able to use the

business or for income-producing

Grants, gifts, and other payments.

cost of repairs to the damaged property

purposes.

Grants and other payments you receive

as evidence of loss in value if:

Do not include any loss previously

to help you after a casualty are

•

The repairs are necessary to restore

deducted on an estate tax return.

considered reimbursements only if they

the property to the condition it was in

must be used specifically to repair or

If you are liable for casualty or theft

immediately before the casualty;

replace your property. Such payments

•

losses to property you lease from

The amount spent for repairs is not

will reduce your casualty loss

someone else, see Pub. 547.

excessive;

deduction. If there are no conditions on

•

The repairs only correct the damage

Line 2

how you have to use the money you

caused by the casualty; and

receive, it is not a reimbursement.

Cost or other basis usually means

•

The value of the property after the

original cost plus improvements.

Use and occupancy insurance. If

repairs is not, as a result of the repairs,

Subtract any postponed gain from the

insurance reimburses you for your loss

more than the value of the property

sale of a previous main home. Special

of business income, it does not reduce

immediately before the casualty.

rules apply to property received as a

your casualty or theft loss. The

To figure a casualty loss to real

gift or inheritance. See Pub. 551, Basis

reimbursement is income, and is taxed

estate not used in a trade, business, or

of Assets, for details.

in the same manner as your business

for income-producing purposes,

income.

Line 3

measure the decrease in value of the

property as a whole. All improvements,

Enter on this line the amount of

Line 4

such as buildings, trees, and shrubs,

insurance or other reimbursement you

If you are entitled to an insurance

are considered together as one item.

received or expect to receive for each

payment or other reimbursement for

Figure the loss separately for other

property. Include your insurance

any part of a casualty or theft loss but

items. For example, figure the loss

coverage whether or not you are filing a

you choose not to file a claim for the

separately for each piece of furniture.

claim for reimbursement. For example,

loss, you cannot realize a gain from

your car worth $2,000 is totally

Line 15

that payment or reimbursement.

destroyed in a collision. You are

Therefore, figure the gain on line 4 by

If line 14 is more than line 13:

insured with a $500 deductible, but

•

subtracting your cost or other basis in

Combine your short-term gains with

decide not to report it to your insurance

the property (line 2) only from the

your short-term losses, and enter the

company because you are afraid the

amount of reimbursement you actually

net short-term gain or loss on Schedule

insurance company will cancel your

received. Enter the result on line 4, but

D (Form 1040), line 4. Estates and

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

do not enter less than zero.

trusts enter this amount on Schedule D

line.

(Form 1041), line 2.

If you filed a claim for reimbursement

•

If you expect to be reimbursed but

Combine your long-term gains with

but did not receive it until after the year

have not yet received payment, you

your long-term losses and enter the net

of the casualty or theft, include the gain

must still enter the expected

long-term gain or loss on Schedule D

in your income in the year you received

reimbursement from the loss. If, in a

(Form 1040), line 11, column (f).

the reimbursement.

later tax year, you determine with

Estates and trusts enter this amount on

Lines 5 and 6

reasonable certainty that you will not be

Schedule D (Form 1041), line 7, column

reimbursed for all or part of the loss,

Fair market value (FMV) is the price at

(f).

you can deduct for that year the

which the property would be sold

The holding period for long-term

amount of the loss that is not

between a willing buyer and a willing

gains and losses is more than 1 year.

reimbursed.

seller, each having knowledge of the

For short-term gains and losses, it is 1

Types of reimbursements. Insurance

relevant facts. The difference between

year or less. To figure the holding

is the most common way to be

the FMV immediately before the

period, begin counting on the day after

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Instructions For Form 4684 - Casualties And Thefts - 2002 Page 3

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