Publication 547 - Casualties,disasters,and Thefts

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Reasonable and necessary expenses in-

Any other person determined by the IRS

Property held more than 1 year. If your

to be affected by a Presidentially declared

losses from business and income-producing

curred for the repair or replacement of the

disaster.

property are more than gains from these types

contents of a personal residence due to a

of property, combine your losses from business

Presidentially declared disaster.

Covered disaster area. This is an area of a

property (other than property used in performing

Presidentially declared disaster in which the IRS

services as an employee) with total gains from

Qualified disaster relief payments also include

has decided to postpone tax deadlines for up to

business and income-producing property. Re-

amounts paid to those affected by the disaster

1 year.

port the net gain or loss as an ordinary gain or

by a federal, state, or local government in con-

loss on Form 4797. If you are not otherwise

nection with a Presidentially declared disaster.

Abatement of interest and penalties. The

required to file Form 4797, only enter the net

IRS may abate the interest and penalties on

Qualified disaster relief payments do

gain or loss on your tax return on the line identi-

underpaid income tax for the length of any post-

not include:

fied as from Form 4797. Next to that line, write

ponement of tax deadlines.

CAUTION

“Form 4684.” Individuals deduct any loss of

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income-producing property and property used in

Insurance or other reimbursements for ex-

Contacting the Federal

performing services as an employee on Sched-

penses, or

Emergency Management

ule A (Form 1040). Partnerships and S corpora-

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Income replacement payments, such as

Agency (FEMA)

tions should see Form 4684 to find out where to

payments of lost wages, lost business in-

report these gains and losses.

come, or unemployment compensation.

If losses from business and income-produc-

If you need to contact FEMA for general informa-

ing property are less than or equal to gains

tion, call 202 – 646 – 4600 (not a toll-free call) or

from these types of property, report the net

visit its web site at

Special rules for main home in a disaster

amount on Form 4797. You may also have to

If you live in an area that was declared a

area. Special rules regarding gains may apply

report the gain on Schedule D depending on

disaster area by the President, you can get infor-

to insurance proceeds you receive because of

whether you have other transactions. Partner-

mation from FEMA by calling the following

the damage or destruction of your main home

ships and S corporations should see Form 4684

phone numbers. These numbers are only acti-

(whether owned or rented) or its contents. For a

to find out where to report these gains and

vated after a Presidentially declared disaster.

discussion of these rules, see Gains Realized

losses.

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on Homes in Disaster Areas in the instructions

1 – 800 – 621 – 3362.

Depreciable property. If the damaged or

for Form 4684.

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1 – 800 – 462 – 7585, if you are a TTY/TDD

stolen property was depreciable property held

user.

Postponed Tax Deadlines

more than 1 year, you may have to treat all or

part of the gain as ordinary income to the extent

of depreciation allowed or allowable. You figure

The IRS may postpone for up to 1 year certain

the ordinary income part of the gain in Part III of

tax deadlines of taxpayers who are affected by a

How To Report

Form 4797. See Depreciation Recapture in

presidentially declared disaster. The tax dead-

chapter 3 of Publication 544 for more informa-

lines the IRS may postpone include those for

Gains and Losses

tion about the recapture rule.

filing income and employment tax returns, pay-

ing income and employment taxes, and making

Adjustments to Basis

How you report gains and losses depends on

contributions to a traditional IRA or Roth IRA.

whether the property was business, income-pro-

If any tax deadline is postponed, the IRS will

If you have a casualty or theft loss, you must

ducing, or personal-use property.

publicize the postponement in your area and

decrease your basis in the property by any insur-

publish a news release, revenue ruling, revenue

Personal-use property. If you have a loss,

ance or other reimbursement you receive and by

procedure, notice, announcement, or other gui-

use both of the following.

any deductible loss. The result is your adjusted

dance in the Internal Revenue Bulletin (IRB).

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basis in the property.

Form 4684.

You must increase your basis in the property

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Schedule A (Form 1040), Itemized Deduc-

Who is eligible. If the IRS postpones a tax

by the amount you spend on repairs that sub-

tions.

deadline, the following taxpayers are eligible for

stantially prolong the life of the property, in-

the postponement.

crease its value, or adapt it to a different use. To

If you have a gain, report it on both of the

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make this determination, compare the repaired

Any individual whose main home is lo-

following.

property to the property before the casualty. See

cated in a covered disaster area (defined

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Adjusted Basis in Publication 551 for more infor-

Form 4684.

later).

mation on adjustments to basis.

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Schedule D (Form 1040), Capital Gains

Any business entity or sole proprietor

and Losses.

If Deductions Are

whose principal place of business is lo-

cated in a covered disaster area.

More Than Income

Business and income-producing property.

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Any individual who is a relief worker affili-

Use Form 4684 to report your gains and losses.

If your casualty or theft loss deduction causes

ated with a recognized government or phil-

You will also have to report the gains and losses

your deductions for the year to be more than

anthropic organization and who is

on other forms as explained next.

your income for the year, you may have a net

assisting in a covered disaster area.

operating loss (NOL). You can use an NOL to

Property held 1 year or less. Individuals

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Any individual, business entity, or sole

lower your tax in an earlier year, allowing you to

report losses from income-producing property

proprietor whose records are needed to

get a refund for tax you already paid. Or, you can

and property used in performing services as an

meet a postponed deadline, provided

use it to lower your tax in a later year. You do not

employee on Schedule A (Form 1040). Gains

those records are maintained in a covered

have to be in business to have an NOL from a

from business and income-producing property

disaster area. The main home or principal

casualty or theft loss. For more information, see

are combined with losses from business prop-

place of business does not have to be

Publication 536, Net Operating Losses (NOLs)

erty (other than property used in performing

located in the covered disaster area.

for Individuals, Estates, and Trusts.

services as an employee) and the net gain or

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loss is reported on Form 4797. If you are not

Any estate or trust that has tax records

otherwise required to file Form 4797, only enter

necessary to meet a postponed tax dead-

the net gain or loss on your tax return on the line

line, provided those records are main-

How To Get Tax Help

identified as from Form 4797. Next to that line,

tained in a covered disaster area.

write “Form 4684.” Partnerships and S corpora-

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The spouse on a joint return with a tax-

tions should see the Form 4684 instructions to

You can get help with unresolved tax issues,

payer who is eligible for postponements.

find out where to report these gains and losses.

order free publications and forms, ask tax ques-

Page 13

Publication 547 - Casualties,disasters,and Thefts - 2002 Page 13

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