Publication 547 - Casualties,disasters,and Thefts - 2002 Page 7

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$100 Rule
a loss of over $100, you are not entitled to any
receive any insurance reimbursement. Your
deduction for these accidents.
loss on the car was $1,200. In November, a fire
damaged your basement and totally destroyed
After you have figured your casualty or theft loss
More than one person. If two or more individ-
the furniture, washer, dryer, and other items you
on personal-use property, as discussed earlier,
uals (other than a husband and wife filing a joint
you must reduce that loss by $100. This reduc-
had stored there. Your loss on the basement
return) have losses from the same casualty or
tion applies to each total casualty or theft loss. It
items after reimbursement was $1,700. Your
theft, the $100 rule applies separately to each
does not matter how many pieces of property
adjusted gross income for the year that the acci-
individual.
are involved in an event. Only a single $100
dent and fire occurred is $25,000. You figure
reduction applies.
your casualty loss deduction as follows.
Example. A fire damaged your house and
also damaged the personal property of your
Example. You have $250 deductible colli-
Car
Basement
house guest. You must reduce your loss by
sion insurance on your car. The car is damaged
$100. Your house guest must reduce his or her
1. Loss . . . . . . . . . . . .
$1,200
$1,700
in a collision. The insurance company pays you
loss by $100.
2. Subtract $100 per
for the damage minus the $250 deductible. The
incident . . . . . . . . .
100
100
Married taxpayers. If you and your spouse
amount of the casualty loss is based solely on
3. Loss after $100 rule
$1,100
$1,600
file a joint return, you are treated as one individ-
the deductible. The casualty loss is $150 ($250
4. Total loss . . . . . . . . . . . . . . .
$2,700
− $100) because the first $100 of a casualty loss
ual in applying the $100 rule. It does not matter
5. Subtract 10% of $25,000 AGI . .
2,500
whether you own the property jointly or sepa-
on personal-use property is not deductible.
6. Casualty loss deduction . . . .
$200
rately.
If you and your spouse have a casualty or
Single event. Generally, events closely re-
theft loss and you file separate returns, each of
lated in origin cause a single casualty. It is a
Married taxpayers. If you and your spouse
you must reduce your loss by $100. This is true
single casualty when the damage is from two or
file a joint return, you are treated as one individ-
even if you own the property jointly. If one
more closely related causes, such as wind and
ual in applying the 10% rule. It does not matter if
spouse owns the property, only that spouse can
flood damage caused by the same storm. A
you own the property jointly or separately.
figure a loss deduction on a separate return.
single casualty may also damage two or more
If you file separate returns, the 10% rule
If the casualty or theft loss is on property you
pieces of property, such as a hailstorm that
applies to each return on which a loss is
own as tenants by the entirety, each of you can
damages both your home and your car parked in
claimed.
figure your deduction on only one-half of the loss
your driveway.
on separate returns. Neither of you can figure
More than one owner. If two or more individu-
your deduction on the entire loss on a separate
Example 1. A thunderstorm destroyed your
als (other than husband and wife filing a joint
return. Each of you must reduce the loss by
pleasure boat. You also lost some boating
return) have a loss on property that is owned
$100.
equipment in the storm. Your loss was $5,000
jointly, the 10% rule applies separately to each.
on the boat and $1,200 on the equipment. Your
More than one owner. If two or more individu-
insurance company reimbursed you $4,500 for
als (other than a husband and wife filing a joint
Gains and losses. If you have casualty or
the damage to your boat. You had no insurance
return) have a loss on property jointly owned, the
theft gains as well as losses to personal-use
coverage on the equipment. Your casualty loss
$100 rule applies separately to each. For exam-
property, you must compare your total gains to
is from a single event and the $100 rule applies
ple, if two sisters live together in a home they
your total losses. Do this after you have reduced
once. Figure your loss before applying the 10%
own jointly and they have a casualty loss on the
each loss by any reimbursements and by $100
rule (discussed later) as follows.
home, the $100 rule applies separately to each
but before you have reduced the losses by 10%
sister.
of your adjusted gross income.
Boat
Equipment
10% Rule
Casualty or theft gains do not include
1. Loss . . . . . . . . . . . .
$5,000
$1,200
!
2. Subtract insurance . .
4,500
– 0 –
gains you choose to postpone. See
3. Loss after
You must reduce the total of all your casualty or
Postponement of Gain, later.
CAUTION
reimbursement . . . . .
$500
$1,200
theft losses on personal-use property by 10% of
your adjusted gross income. Apply this rule after
Losses more than gains. If your losses are
4. Total loss . . . . . . . . . . . . . .
$1,700
you reduce each loss by $100. If you have both
5. Subtract $100 . . . . . . . . . . .
100
more than your recognized gains, subtract your
gains and losses from casualties or thefts, see
6. Loss before 10% rule . . . . .
$1,600
gains from your losses and reduce the result by
Gains and losses, later in this discussion.
10% of your adjusted gross income. The rest, if
any, is your deductible loss from personal-use
Example 2. Thieves broke into your home in
Example. In June, you discovered that your
property.
January and stole a ring and a fur coat. You had
house had been burglarized. Your loss after
a loss of $200 on the ring and $700 on the coat.
insurance reimbursement was $2,000. Your ad-
Example. Your theft loss after reducing it by
This is a single theft. The $100 rule applies to
justed gross income for the year you discovered
reimbursements and by $100 is $2,700. Your
the total $900 loss.
the theft is $29,500. Figure your theft loss as
casualty gain is $700. Your loss is more than
follows.
your gain, so you must reduce your $2,000 net
Example 3. In September, hurricane winds
loss ($2,700 − $700) by 10% of your adjusted
blew the roof off your home. Flood waters
1. Loss after insurance . . . . . . . . .
$2,000
gross income.
caused by the hurricane further damaged your
2. Subtract $100 . . . . . . . . . . . . .
100
home and destroyed your furniture and personal
3. Loss after $100 rule . . . . . . . . .
$1,900
Gains more than losses. If your recog-
car. This is considered a single casualty. The
4. Subtract 10% of $29,500 AGI . . .
$2,950
nized gains are more than your losses, subtract
5. Theft loss deduction . . . . . . . .
– 0 –
$100 rule is applied to your total loss from the
your losses from your gains. The difference is
flood waters and the wind.
treated as a capital gain and must be reported
You do not have a theft loss deduction be-
on Schedule D (Form 1040). The 10% rule does
cause your loss ($1,900) is less than 10% of
More than one loss. If you have more than
not apply to your gains.
your adjusted gross income ($2,950).
one casualty or theft loss during your tax year,
you must reduce each loss by $100.
More than one loss. If you have more than
Example. Your theft loss is $600 after re-
one casualty or theft loss during your tax year,
ducing it by reimbursements and by $100. Your
Example. Your family car was damaged in
reduce each loss by any reimbursement and by
casualty gain is $1,600. Because your gain is
an accident in January. Your loss after the insur-
$100. Then you must reduce the total of all your
more than your loss, you must report the $1,000
ance reimbursement was $75. In February, your
losses by 10% of your adjusted gross income.
net capital gain ($1,600 − $600) on Schedule D.
car was damaged in another accident. This time
your loss after the insurance reimbursement
Example. In March, you had a car accident
More information. For information on how
was $90. Apply the $100 rule to each separate
that totally destroyed your car. You did not have
to figure recognized gains, see Figuring a Gain,
casualty loss. Since neither accident resulted in
collision insurance on your car, so you did not
later.
Page 7

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