Instructions For Form 4684 - Casualties And Thefts

If you have a casualty loss from a disaster

2. Any other insurance proceeds you

property equals its cost decreased by the

that occurred in an area warranting public or

receive for the home or its contents are

amount of any postponed gain.

individual assistance (or both), you can elect

treated as received for a single item of

Special Treatment for

to deduct the loss in the tax year immediately

property, and any replacement property you

prior to the tax year in which the disaster

purchase that is similar or related in service

Losses on Deposits in

occurred as long as the loss would otherwise

or use to the home or its contents is treated

Insolvent or Bankrupt

be allowed as a deduction in the tax year it

as similar or related in service or use to that

occurred.

single item of property. Therefore, you can

Financial Institutions

choose to recognize gain only to the extent

This election must be made by filing your

If you are an individual who incurred a loss

the insurance proceeds treated as received

return or amended return for the prior year,

from a deposit in a bank, credit union, or

for that single item of property exceed the

and claiming your disaster loss on it, by the

other financial institution because of the

cost of the replacement property.

later of:

bankruptcy or insolvency of that institution

3. If you choose to postpone any gain

The due date for filing your original return

and you can reasonably estimate your loss,

from the receipt of insurance or other

(without extensions) for the tax year in which

you can elect to deduct the loss as:

reimbursement for your main home or any of

the disaster actually occurred, or

A casualty loss to personal use property

its contents, the period in which you must

The due date for filing your original return

on Form 4684, or

purchase replacement property is extended

(including extensions) for the tax year

An ordinary loss (miscellaneous itemized

until 4 years after the end of the first tax year

immediately prior to the tax year in which the

deduction) on Schedule A (Form 1040),

in which any part of the gain is realized.

disaster actually occurred.

Itemized Deductions, line 23, or Form

However, the 4-year period is extended to 5

1040NR, Schedule A, Itemized Deductions,

years if your main home or any of its

You can revoke your election within 90

line 9. You cannot elect the ordinary loss

contents were located in the:

days after making it by returning to the IRS

deduction if any part of the deposits related

any refund or credit you received from the

a. Hurricane Katrina disaster area

to the loss is federally insured. The maximum

election. If you revoke your election before

(which includes the states of Alabama,

amount you can claim is $20,000 ($10,000 if

receiving a refund, you must repay the

Florida, Louisiana, and Mississippi) and that

you are married filing separately). Your

refund within 30 days after receiving it.

property was converted after August 24,

deduction is reduced by any expected state

2005, as a result of Hurricane Katrina, but

insurance proceeds and is subject to the

On line 1 of the Form 4684 on which you

only if substantially all of the use of the

2%-of-adjusted-gross-income (AGI) limit.

claim the disaster loss (or on an attachment),

replacement property is in that disaster area.

specify the date(s) of the disaster and the

If you elect to deduct the estimated loss

b. Kansas disaster area (as defined in

city, town, county or parish, and state in

as a casualty loss or as an ordinary loss, you

Pub. 4492-A) and that property was

which the damaged or destroyed property

cannot claim the same loss as a

converted after May 3, 2007, as a result of

was located.

nonbusiness bad debt. If the estimated loss

the storms or tornadoes, but only if

deducted is less than the actual loss, you

To determine the amount to deduct for a

substantially all of the use of the replacement

can claim the difference as a nonbusiness

disaster loss, you must take into account as

property is in that disaster area.

bad debt for the year in which the final

reimbursements any benefits you received or

c. Midwestern disaster areas (as

determination of the loss occurs. A

which you have a reasonable possibility of

defined in Pub. 4492-B) and that property

nonbusiness bad debt is deducted on

receiving from federal or state programs to

was converted on or after the applicable

Schedule D (Form 1040), Capital Gains and

restore your property.

disaster date as a result of severe storms,

Losses, as a short-term capital loss.

Home made unsafe by disaster. If your

tornadoes, or flooding, but only if

home was located in a disaster area and

If you are a 1% or more owner or an

substantially all of the use of the replacement

officer of the financial institution, or are

your state or local government ordered you

property is in those disaster areas.

related to any such owner or officer, you

to tear it down or move it because it was no

For details on how to postpone gain, see

longer safe to use as a home because of the

cannot deduct the loss as a casualty loss or

Pub. 547.

as an ordinary loss. See Pub. 550,

disaster, the loss in value because it is no

longer safe is treated as a disaster loss. The

Investment Income and Expenses, for the

Example. Your main home and its

order for you to tear down or move the home

definition of “related.”

contents were completely destroyed in 2012

must have been issued within 120 days after

by a tornado in a federally declared disaster

If you elect to deduct the loss as a

the area was officially declared a disaster

area. In 2012, you received insurance

casualty loss or as an ordinary loss and you

area.

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

have more than one account in the same

for unscheduled personal property in your

For purposes of figuring the disaster loss,

financial institution, you must include all your

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

use the value of your home before you

accounts. Once you make the election, you

stamp collection. The jewelry and stamp

moved it or tore it down as its fair market

cannot change it without permission from the

collection were kept in your home and were

value after the casualty.

IRS. See Notice 89-28, 1989-1 C.B. 667, for

scheduled property on your insurance policy.

more details.

Gains Realized on Homes

No gain is recognized on the $25,000 you

received for the unscheduled personal

To elect to deduct the loss as a casualty

in Disaster Areas

property. If you reinvest the remaining

loss, complete Form 4684 as follows: On

proceeds of $215,000 in a replacement

The following rules apply if your main home

line 1, enter the name of the financial

home, any type of replacement contents

was located in an area declared by the

institution and “Insolvent Financial

(whether scheduled or unscheduled), or

President of the United States to warrant

Institution.” Skip lines 2 through 9. Enter the

both, you can elect to postpone any gain on

amount of the loss on line 10, and complete

federal assistance as the result of a disaster,

your home, jewelry, or stamp collection. If

and the home or any of its contents were

the rest of Section A.

you reinvest less than $215,000, any gain is

damaged or destroyed due to the disaster.

If, in a later year, you recover an amount

recognized only to the extent $215,000

These rules also apply to renters who

you deducted as a loss, you may have to

exceeds the amount you reinvest in a

receive insurance proceeds for damaged or

include in your income the amount recovered

replacement home, any type of replacement

destroyed property in a rented home that is

for that year. For details, see Recoveries in

contents (whether scheduled or

their main home.

Pub. 525, Taxable and Nontaxable Income.

unscheduled), or both. To postpone gain,

1. No gain is recognized on any

you must purchase the replacement property

insurance proceeds received for

before 2017. Your basis in the replacement

unscheduled personal property that was part

of the contents of the home.

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Instructions For Form 4684 - Casualties And Thefts - 2012 Page 2

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