Publication 547 - Casualties, Disasters, And Thefts - Department Of Treasury

Qualified disaster relief payments include

meet a postponed deadline, provided

and property used in performing services as an

payments you receive (regardless of the source)

those records are maintained in a covered

employee on Schedule A (Form 1040). Gains

for the following expenses.

disaster area. The main home or principal

from business and income-producing property

place of business does not have to be

are combined with losses from business prop-

•

Reasonable and necessary personal, fam-

located in the covered disaster area.

erty (other than property used in performing

ily, living, or funeral expenses incurred as

services as an employee) and the net gain or

•

a result of a Presidentially declared disas-

Any estate or trust that has tax records

loss is reported on Form 4797. If you are not

ter.

necessary to meet a postponed tax dead-

otherwise required to file Form 4797, only enter

line, provided those records are main-

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Reasonable and necessary expenses in-

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

tained in a covered disaster area.

curred for the repair or rehabilitation of a

identified as from Form 4797. Next to that line,

•

personal residence due to a Presidentially

The spouse on a joint return with a tax-

enter “Form 4684.” Partnerships and S corpora-

declared disaster. (A personal residence

payer who is eligible for postponements.

tions should see the Form 4684 instructions to

can be a rented residence or one you

•

find out where to report these gains and losses.

Any other person determined by the IRS

own.)

to be affected by a Presidentially declared

Property held more than 1 year. If your

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Reasonable and necessary expenses in-

disaster.

losses from business and income-producing

curred for the repair or replacement of the

property are more than gains from these types of

Covered disaster area. This is an area of a

contents of a personal residence due to a

property, combine your losses from business

Presidentially declared disaster in which the IRS

Presidentially declared disaster.

property (other than property used in performing

has decided to postpone tax deadlines for up to

services as an employee) with total gains from

Qualified disaster relief payments also include

1 year.

business and income-producing property. Re-

amounts paid to those affected by the disaster

port the net gain or loss as an ordinary gain or

Abatement of interest and penalties. The

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

loss on Form 4797. If you are not otherwise

IRS may abate the interest and penalties on

nection with a Presidentially declared disaster.

required to file Form 4797, only enter the net

underpaid income tax for the length of any post-

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

Qualified disaster relief payments do

ponement of tax deadlines.

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

not include:

“Form 4684.” Individuals deduct any loss of

CAUTION

Contacting the Federal

income-producing property and property used in

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Payments for expenses otherwise paid for

Emergency Management

performing services as an employee on Sched-

by insurance or other reimbursements, or

Agency (FEMA)

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

•

tions should see Form 4684 to find out where to

Income replacement payments, such as

report these gains and losses.

If you need to contact FEMA for general informa-

payments of lost wages, lost business in-

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

If losses from business and income-produc-

come, or unemployment compensation.

visit its web site at

ing property are less than or equal to gains from

If you live in an area that was declared a

these types of property, report the net amount

Special rules for main home in a disaster

disaster area by the President, you can get infor-

on Form 4797. You may also have to report the

area. Special rules regarding gains may apply

mation from FEMA by calling the following

gain on Schedule D depending on whether you

to insurance proceeds you receive because of

phone numbers. These numbers are only acti-

have other transactions. Partnerships and S cor-

the damage or destruction of your main home

vated after a Presidentially declared disaster.

porations should see Form 4684 to find out

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

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where to report these gains and losses.

discussion of these rules, see Gains Realized

1-800-621-3362.

on Homes in Disaster Areas in the instructions

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Depreciable property. If the damaged or

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

for Form 4684.

stolen property was depreciable property held

user.

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

Postponed Tax Deadlines

part of the gain as ordinary income to the extent

of depreciation allowed or allowable. You figure

The IRS may postpone for up to one year certain

the ordinary income part of the gain in Part III of

How To Report

tax deadlines of taxpayers who are affected by a

Form 4797. See Depreciation Recapture in

Presidentially declared disaster. The tax dead-

chapter 3 of Publication 544 for more informa-

Gains and Losses

lines the IRS may postpone include those for

tion about the recapture rule.

filing income and employment tax returns, pay-

ing income and employment taxes, and making

How you report gains and losses depends on

Adjustments to Basis

contributions to a traditional IRA or Roth IRA.

whether the property was business, income-pro-

If any tax deadline is postponed, the IRS will

ducing, or personal-use property.

If you have a casualty or theft loss, you must

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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Who is eligible. If the IRS postpones a tax

Schedule A (Form 1040), Itemized Deduc-

by the amount you spend on repairs that sub-

deadline, the following taxpayers are eligible for

tions.

stantially prolong the life of the property, in-

the postponement.

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

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

Any individual whose main home is lo-

make this determination, compare the repaired

following.

cated in a covered disaster area (defined

property to the property before the casualty. See

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later).

Form 4684.

Adjusted Basis in Publication 551 for more infor-

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mation on adjustments to basis.

Any business entity or sole proprietor

Schedule D (Form 1040), Capital Gains

whose principal place of business is lo-

and Losses.

If Deductions Are

cated in a covered disaster area.

More Than Income

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Any individual who is a relief worker affili-

Business and income-producing property.

ated with a recognized government or phil-

Use Form 4684 to report your gains and losses.

If your casualty or theft loss deduction causes

anthropic organization and who is

You will also have to report the gains and losses

your deductions for the year to be more than

assisting in a covered disaster area.

on other forms as explained next.

your income for the year, you may have a net

•

Any individual, business entity, or sole

Property held 1 year or less. Individuals

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

proprietor whose records are needed to

report losses from income-producing property

lower your tax in an earlier year, allowing you to

Page 13

Publication 547 - Casualties, Disasters, And Thefts - Department Of Treasury - 2004 Page 13

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