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Form1040ez

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Form1040ez

Form1040ez Publication 3991 - Introductory Material Table of Contents Introduction Introduction All of the changes discussed in this publication resulted from the Job Creation and Worker Assistance Act of 2002. Form1040ez This publication highlights tax law changes that took effect retroactively for 2001 and others that take effect in 2002 and later years. Form1040ez The chapters are divided into separate sections based on when the changes take effect. Form1040ez For example, this publication covers the following topics. Form1040ez Tax benefits for the area of New York City damaged in terrorist attacks on September 11, 2001. Form1040ez New deduction available for educator expenses. Form1040ez Limit on the use of the non-accrual experience method of accounting. Form1040ez Pension changes such as the new tax credit for certain pension plan startup costs, an increased SEP contribution limit, figuring 403(b) catch-up contributions, and a provision for deemed IRAs. Form1040ez Extension of the welfare-to-work credit and work opportunity credit. Form1040ez New 5-year carryback rule for net operating losses (NOLs). Form1040ez See the discussion of each topic for more information. Form1040ez Certain changes had a major effect on two of the publications we issued for 2001. Form1040ez We published supplements to those two publications and they have been included in this publication as follows. Form1040ez Chapter 4 contains the supplement to Publication 463, Travel, Entertainment, Gift, and Car Expenses. Form1040ez This discusses the increase in the amount of depreciation deduction for certain automobiles. Form1040ez Chapter 5 contains the supplement to Publication 946, How To Depreciate Property. Form1040ez This discusses the special depreciation allowance for property acquired after September 10, 2001. Form1040ez Adjusting your withholding or estimated tax payments for 2002. Form1040ez   If your tax for 2002 will be more or less than your 2001 tax, you may need to adjust your withholding or estimated tax payments accordingly. Form1040ez If your tax will decrease, you can get the benefit of lower taxes throughout the year. Form1040ez If you will owe more tax, you can avoid a penalty when you file your tax return. Form1040ez   See the following table for forms and publications that will help you adjust your withholding or estimated tax payments. Form1040ez See chapter 6 for information on ordering forms and publications. Form1040ez To adjust your. Form1040ez . Form1040ez . Form1040ez . Form1040ez Get Form. Form1040ez . Form1040ez . Form1040ez And Publication. Form1040ez . Form1040ez . Form1040ez Withholding W–4, Employee's Withholding Allowance Certificate 919, How Do I Adjust My Tax Withholding? Estimated tax payments 1040–ES, Estimated Tax for Individuals 505, Tax Withholding and Estimated Tax Photographs of missing children. Form1040ez   The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Form1040ez Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Form1040ez You can help bring these children home by looking at the photographs and calling 1–800–THE–LOST (1–800–843–5678) if you recognize a child. Form1040ez Comments and suggestions. Form1040ez   We welcome your comments about this publication. Form1040ez   You can e-mail us while visiting our web site at www. Form1040ez irs. Form1040ez gov. Form1040ez   You can write to us at the following address: Internal Revenue Service Technical Publications Branch W:CAR:MP:FP:P 1111 Constitution Ave. Form1040ez NW Washington, DC 20224   We respond to many letters by telephone. Form1040ez Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Form1040ez Prev  Up  Next   Home   More Online Publications
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The Form1040ez

Form1040ez 11. Form1040ez   Casualties, Thefts, and Condemnations Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Casualties and TheftsDeductible losses. Form1040ez Nondeductible losses. Form1040ez Family pet. Form1040ez Progressive deterioration. Form1040ez Decline in market value of stock. Form1040ez Mislaid or lost property. Form1040ez Farming Losses How To Figure a Loss Deduction Limits on Losses of Personal-Use Property When Loss Is Deductible Proof of Loss Figuring a Gain Other Involuntary ConversionsCondemnation Irrigation Project Livestock Losses Tree Seedlings Postponing GainException. Form1040ez Related persons. Form1040ez Replacement Property Replacement Period How To Postpone Gain Disaster Area LossesWho is eligible. Form1040ez Covered disaster area. Form1040ez Reporting Gains and Losses Introduction This chapter explains the tax treatment of casualties, thefts, and condemnations. Form1040ez A casualty occurs when property is damaged, destroyed, or lost due to a sudden, unexpected, or unusual event. Form1040ez A theft occurs when property is stolen. Form1040ez A condemnation occurs when private property is legally taken for public use without the owner's consent. Form1040ez A casualty, theft, or condemnation may result in a deductible loss or taxable gain on your federal income tax return. Form1040ez You may have a deductible loss or a taxable gain even if only a portion of your property was affected by a casualty, theft, or condemnation. Form1040ez An involuntary conversion occurs when you receive money or other property as reimbursement for a casualty, theft, condemnation, disposition of property under threat of condemnation, or certain other events discussed in this chapter. Form1040ez If an involuntary conversion results in a gain and you buy qualified replacement property within the specified replacement period, you can postpone reporting the gain on your income tax return. Form1040ez For more information, see Postponing Gain , later. Form1040ez Topics - This chapter discusses: Casualties and thefts How to figure a loss or gain Other involuntary conversions Postponing gain Disaster area losses Reporting gains and losses Drought involving property connected with a trade or business or a transaction entered into for profit Useful Items - You may want to see: Publication 523 Selling Your Home 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 544 Sales and Other Dispositions of Assets 547 Casualties, Disasters, and Thefts 584 Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property) 584-B Business Casualty, Disaster, and Theft Loss Workbook Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch D (Form 1040) Capital Gains and Losses Sch F (Form 1040) Profit or Loss From Farming 4684 Casualties and Thefts 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Form1040ez Casualties and Thefts If your property is destroyed, damaged, or stolen, you may have a deductible loss. Form1040ez If the insurance or other reimbursement is more than the adjusted basis of the destroyed, damaged, or stolen property, you may have a taxable gain. Form1040ez Casualty. Form1040ez   A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Form1040ez A sudden event is one that is swift, not gradual or progressive. Form1040ez An unexpected event is one that is ordinarily unanticipated and unintended. Form1040ez An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. Form1040ez Deductible losses. Form1040ez   Deductible casualty losses can result from a number of different causes, including the following. Form1040ez Airplane crashes. Form1040ez Car, truck, or farm equipment accidents not resulting from your willful act or willful negligence. Form1040ez Earthquakes. Form1040ez Fires (but see Nondeductible losses next for exceptions). Form1040ez Floods. Form1040ez Freezing. Form1040ez Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses, in Publication 547. Form1040ez Lightning. Form1040ez Storms, including hurricanes and tornadoes. Form1040ez Terrorist attacks. Form1040ez Vandalism. Form1040ez Volcanic eruptions. Form1040ez Nondeductible losses. Form1040ez   A casualty loss is not deductible if the damage or destruction is caused by the following. Form1040ez Accidentally breaking articles such as glassware or china under normal conditions. Form1040ez A family pet (explained below). Form1040ez A fire if you willfully set it, or pay someone else to set it. Form1040ez A car, truck, or farm equipment accident if your willful negligence or willful act caused it. Form1040ez The same is true if the willful act or willful negligence of someone acting for you caused the accident. Form1040ez Progressive deterioration (explained below). Form1040ez Family pet. Form1040ez   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed above under Casualty are met. Form1040ez Example. Form1040ez You keep your horse in your yard. Form1040ez The ornamental fruit trees in your yard were damaged when your horse stripped the bark from them. Form1040ez Some of the trees were completely girdled and died. Form1040ez Because the damage was not unexpected or unusual, the loss is not deductible. Form1040ez Progressive deterioration. Form1040ez   Loss of property due to progressive deterioration is not deductible as a casualty loss. Form1040ez This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Form1040ez Examples of damage due to progressive deterioration include damage from rust, corrosion, or termites. Form1040ez However, weather-related conditions or disease may cause another type of involuntary conversion. Form1040ez See Other Involuntary Conversions , later. Form1040ez Theft. Form1040ez   A theft is the taking and removing of money or property with the intent to deprive the owner of it. Form1040ez The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent. Form1040ez You do not need to show a conviction for theft. Form1040ez   Theft includes the taking of money or property by the following means: Blackmail, Burglary, Embezzlement, Extortion, Kidnapping for ransom, Larceny, Robbery, or Threats. Form1040ez The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Form1040ez Decline in market value of stock. Form1040ez   You cannot deduct as a theft loss the decline in market value of stock acquired on the open market for investment if the decline is caused by disclosure of accounting fraud or other illegal misconduct by the officers or directors of the corporation that issued the stock. Form1040ez However, you can deduct as a capital loss the loss you sustain when you sell or exchange the stock or the stock becomes completely worthless. Form1040ez You report a capital loss on Schedule D (Form 1040). Form1040ez For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Form1040ez Mislaid or lost property. Form1040ez   The simple disappearance of money or property is not a theft. Form1040ez However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Form1040ez Example. Form1040ez A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Form1040ez The diamond falls from the ring and is never found. Form1040ez The loss of the diamond is a casualty. Form1040ez Farming Losses You can deduct certain casualty or theft losses that occur in the business of farming. Form1040ez The following is a discussion of some losses you can deduct and some you cannot deduct. Form1040ez Livestock or produce bought for resale. Form1040ez   Casualty or theft losses of livestock or produce bought for resale are deductible if you report your income on the cash method. Form1040ez If you report your income on an accrual method, take casualty and theft losses on property bought for resale by omitting the item from the closing inventory for the year of the loss. Form1040ez You cannot take a separate deduction. Form1040ez Livestock, plants, produce, and crops raised for sale. Form1040ez   Losses of livestock, plants, produce, and crops raised for sale are generally not deductible if you report your income on the cash method. Form1040ez You have already deducted the cost of raising these items as farm expenses, so their basis is equal to zero. Form1040ez   For plants with a preproductive period of more than 2 years, you may have a deductible loss if you have a tax basis in the plants. Form1040ez You usually have a tax basis if you capitalized the expenses associated with these plants under the uniform capitalization rules. Form1040ez The uniform capitalization rules are discussed in chapter 6. Form1040ez   If you report your income on an accrual method, casualty or theft losses are deductible only if you included the items in your inventory at the beginning of your tax year. Form1040ez You get the deduction by omitting the item from your inventory at the close of your tax year. Form1040ez You cannot take a separate casualty or theft deduction. Form1040ez Income loss. Form1040ez   A loss of future income is not deductible. Form1040ez Example. Form1040ez A severe flood destroyed your crops. Form1040ez Because you are a cash method taxpayer and already deducted the cost of raising the crops as farm expenses, this loss is not deductible, as explained above under Livestock, plants, produce, and crops raised for sale . Form1040ez You estimate that the crop loss will reduce your farm income by $25,000. Form1040ez This loss of future income is also not deductible. Form1040ez Loss of timber. Form1040ez   If you sell timber downed as a result of a casualty, treat the proceeds from the sale as a reimbursement. Form1040ez If you use the proceeds to buy qualified replacement property, you can postpone reporting the gain. Form1040ez See Postponing Gain , later. Form1040ez Property used in farming. Form1040ez   Casualty and theft losses of property used in your farm business usually result in deductible losses. Form1040ez If a fire or storm destroyed your barn, or you lose by casualty or theft an animal you bought for draft, breeding, dairy, or sport, you may have a deductible loss. Form1040ez See How To Figure a Loss , later. Form1040ez Raised draft, breeding, dairy, or sporting animals. Form1040ez   Generally, losses of raised draft, breeding, dairy, or sporting animals do not result in deductible casualty or theft losses because you have no basis in the animals. Form1040ez However, you may have a basis in the animal and therefore may be able to claim a deduction if either of the following situations applies to you. Form1040ez You use inventories to determine your income and you included the animals in your inventory. Form1040ez You capitalized the expenses associated with the animals under the uniform capitalization rules and therefore have a tax basis in the animals subject to a casualty or theft. Form1040ez When you include livestock in inventory, its last inventory value is its basis. Form1040ez When you lose an inventoried animal held for draft, breeding, dairy, or sport by casualty or theft during the year, decrease ending inventory by the amount you included in inventory for the animal. Form1040ez You cannot take a separate deduction. Form1040ez How To Figure a Loss How you figure a deductible casualty or theft loss depends on whether the loss was to farm or personal-use property and whether the property was stolen or partly or completely destroyed. Form1040ez Farm property. Form1040ez   Farm property is the property you use in your farming business. Form1040ez If your farm property was completely destroyed or stolen, your loss is figured as follows:      Your adjusted basis in the property     MINUS     Any salvage value     MINUS     Any insurance or other reimbursement you  receive or expect to receive      You can use the schedules in Publication 584-B to list your stolen, damaged, or destroyed business property and to figure your loss. Form1040ez   If your farm property was partially damaged, use the steps shown under Personal-use property next to figure your casualty loss. Form1040ez However, the deduction limits, discussed later, do not apply to farm property. Form1040ez Personal-use property. Form1040ez   Personal-use property is property used by you or your family members for personal purposes and not used in your farm business or for income-producing purposes. Form1040ez The following items are examples of personal-use property: Your main home. Form1040ez Furniture and electronics used in your main home and not used in a home office or for business purposes. Form1040ez Clothing and jewelry. Form1040ez An automobile used for nonbusiness purposes. Form1040ez You figure the casualty or theft loss on this property by taking the following steps. Form1040ez Determine your adjusted basis in the property before the casualty or theft. Form1040ez Determine the decrease in fair market value of the property as a result of the casualty or theft. Form1040ez From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you receive or expect to receive. Form1040ez You must apply the deduction limits, discussed later, to determine your deductible loss. Form1040ez    You can use Publication 584 to list your stolen or damaged personal-use property and figure your loss. Form1040ez It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. Form1040ez Adjusted basis. Form1040ez   Adjusted basis is your basis (usually cost) increased or decreased by various events, such as improvements and casualty losses. Form1040ez For more information about adjusted basis, see chapter 6. Form1040ez Decrease in fair market value (FMV). Form1040ez   The decrease in FMV is the difference between the property's value immediately before the casualty or theft and its value immediately afterward. Form1040ez FMV is defined in chapter 10 under Payments Received or Considered Received . Form1040ez Appraisal. Form1040ez   To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. Form1040ez But other measures, such as the cost of cleaning up or making repairs (discussed next) can be used to establish decreases in FMV. Form1040ez   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterward should be made by a competent appraiser. Form1040ez The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Form1040ez This information is needed to limit any deduction to the actual loss resulting from damage to the property. Form1040ez Cost of cleaning up or making repairs. Form1040ez   The cost of cleaning up after a casualty is not part of a casualty loss. Form1040ez Neither is the cost of repairing damaged property after a casualty. Form1040ez But you can use the cost of cleaning up or making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. Form1040ez The repairs are actually made. Form1040ez The repairs are necessary to bring the property back to its condition before the casualty. Form1040ez The amount spent for repairs is not excessive. Form1040ez The repairs fix the damage only. Form1040ez The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Form1040ez Related expenses. Form1040ez   The incidental expenses due to a casualty or theft, such as expenses for the treatment of personal injuries, temporary housing, or a rental car, are not part of your casualty or theft loss. Form1040ez However, they may be deductible as farm business expenses if the damaged or stolen property is farm property. Form1040ez Separate computations for more than one item of property. Form1040ez   Generally, if a single casualty or theft involves more than one item of property, you must figure your loss separately for each item of property. Form1040ez Then combine the losses to determine your total loss. Form1040ez    There is an exception to this rule for personal-use real property. Form1040ez See Exception for personal-use real property, later. Form1040ez Example. Form1040ez A fire on your farm damaged a tractor and the barn in which it was stored. Form1040ez The tractor had an adjusted basis of $3,300. Form1040ez Its FMV was $28,000 just before the fire and $10,000 immediately afterward. Form1040ez The barn had an adjusted basis of $28,000. Form1040ez Its FMV was $55,000 just before the fire and $25,000 immediately afterward. Form1040ez You received insurance reimbursements of $2,100 on the tractor and $26,000 on the barn. Form1040ez Figure your deductible casualty loss separately for the two items of property. Form1040ez     Tractor Barn 1) Adjusted basis $3,300 $28,000 2) FMV before fire $28,000 $55,000 3) FMV after fire 10,000 25,000 4) Decrease in FMV  (line 2 − line 3) $18,000 $30,000 5) Loss (lesser of line 1 or line 4) $3,300 $28,000 6) Minus: Insurance 2,100 26,000 7) Deductible casualty loss $1,200 $2,000 8) Total deductible casualty loss $3,200 Exception for personal-use real property. Form1040ez   In figuring a casualty loss on personal-use real property, the entire property (including any improvements, such as buildings, trees, and shrubs) is treated as one item. Form1040ez Figure the loss using the smaller of the following. Form1040ez The decrease in FMV of the entire property. Form1040ez The adjusted basis of the entire property. Form1040ez Example. Form1040ez You bought a farm in 1990 for $160,000. Form1040ez The adjusted basis of the residential part is now $128,000. Form1040ez In 2013, a windstorm blew down shade trees and three ornamental trees planted at a cost of $7,500 on the residential part. Form1040ez The adjusted basis of the residential part includes the $7,500. Form1040ez The fair market value (FMV) of the residential part immediately before the storm was $400,000, and $385,000 immediately after the storm. Form1040ez The trees were not covered by insurance. Form1040ez 1) Adjusted basis $128,000 2) FMV before the storm $400,000 3) FMV after the storm 385,000 4) Decrease in FMV (line 2 − line 3) $15,000 5) Loss before insurance (lesser of line 1 or line 4) $15,000 6) Minus: Insurance -0- 7) Amount of loss $15,000 Insurance and other reimbursements. Form1040ez   If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Form1040ez You do not have a casualty or theft loss to the extent you are reimbursed. Form1040ez   If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Form1040ez You must reduce your loss even if you do not receive payment until a later tax year. Form1040ez    Do not subtract from your loss any insurance payments you receive for living expenses if you lose the use of your main home or are denied access to it because of a casualty. Form1040ez You may have to include a portion of these payments in your income. Form1040ez See Insurance payments for living expenses in Publication 547 for details. Form1040ez Disaster relief. Form1040ez   Food, medical supplies, and other forms of assistance you receive do not reduce your casualty loss, unless they are replacements for lost or destroyed property. Form1040ez Excludable cash gifts you receive also do not reduce your casualty loss if there are no limits on how you can use the money. Form1040ez   Generally, disaster relief grants received under the Robert T. Form1040ez Stafford Disaster Relief and Emergency Assistance Act are not included in your income. Form1040ez See Federal disaster relief grants , later, under Disaster Area Losses . Form1040ez   Qualified disaster relief payments for expenses you incurred as a result of a federally declared disaster are not taxable income to you. Form1040ez See Qualified disaster relief payments , later, under Disaster Area Losses . Form1040ez Reimbursement received after deducting loss. Form1040ez   If you figure your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you get your actual reimbursement. Form1040ez Actual reimbursement less than expected. Form1040ez   If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement. Form1040ez Actual reimbursement more than expected. Form1040ez   If you later receive more reimbursement than you expected after you have claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. Form1040ez However, if any part of your original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. Form1040ez Do not refigure your tax for the year you claimed the deduction. Form1040ez See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. Form1040ez If the total of all the reimbursements you receive is more than your adjusted basis in the destroyed or stolen property, you will have a gain on the casualty or theft. Form1040ez See Figuring a Gain in Publication 547 for information on how to treat a gain from the reimbursement you receive because of a casualty or theft. Form1040ez Actual reimbursement same as expected. Form1040ez   If you receive exactly the reimbursement you expected to receive, you do not have to include any of the reimbursement in your income and you cannot deduct any additional loss. Form1040ez Lump-sum reimbursement. Form1040ez   If you have a casualty or theft loss of several assets at the same time without an allocation of reimbursement to specific assets, divide the lump-sum reimbursement among the assets according to the fair market value of each asset at the time of the loss. Form1040ez Figure the gain or loss separately for each asset that has a separate basis. Form1040ez Adjustments to basis. Form1040ez   If you have a casualty or theft loss, you must decrease your basis in the property by any insurance or other reimbursement you receive and by any deductible loss. Form1040ez The result is your adjusted basis in the property. Form1040ez Amounts you spend on repairs to restore your property to its pre-casualty condition increase your adjusted basis. Form1040ez See Adjusted Basis in chapter 6 for more information. Form1040ez Example. Form1040ez You built a new silo for $25,000. Form1040ez This is the basis in your silo because that is the total cost you incurred to build it. Form1040ez During the year, a tornado damaged your silo and your allowable casualty loss deduction was $1,000. Form1040ez In addition, your insurance company reimbursed you $4,000 for the damage and you spent $6,000 to restore the silo to its pre-casualty condition. Form1040ez Your adjusted basis in the silo after the casualty is $26,000 ($25,000 - $1,000 - $4,000 + $6,000). Form1040ez Deduction Limits on Losses of Personal-Use Property Casualty and theft losses of property held for personal use may be deductible if you itemize deductions on Schedule A (Form 1040). Form1040ez There are two limits on the deduction for casualty or theft loss of personal-use property. Form1040ez You figure these limits on Form 4684. Form1040ez $100 rule. Form1040ez   You must reduce each casualty or theft loss on personal-use property by $100. Form1040ez This rule applies after you have subtracted any reimbursement. Form1040ez 10% rule. Form1040ez   You must further reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. Form1040ez Apply this rule after you reduce each loss by $100. Form1040ez Adjusted gross income is on line 38 of Form 1040. Form1040ez Example. Form1040ez In June, you discovered that your house had been burglarized. Form1040ez Your loss after insurance reimbursement was $2,000. Form1040ez Your adjusted gross income for the year you discovered the burglary is $57,000. Form1040ez Figure your theft loss deduction as follows: 1. Form1040ez Loss after insurance $2,000 2. Form1040ez Subtract $100 100 3. Form1040ez Loss after $100 rule $1,900 4. Form1040ez Subtract 10% (. Form1040ez 10) × $57,000 AGI $5,700 5. Form1040ez Theft loss deduction -0- You do not have a theft loss deduction because your loss ($1,900) is less than 10% of your adjusted gross income ($5,700). Form1040ez    If you have a casualty or theft gain in addition to a loss, you will have to make a special computation before you figure your 10% limit. Form1040ez See 10% Rule in Publication 547. Form1040ez When Loss Is Deductible Generally, you can deduct casualty losses that are not reimbursable only in the tax year in which they occur. Form1040ez You generally can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. Form1040ez However, losses in federally declared disaster areas are subject to different rules. Form1040ez See Disaster Area Losses , later, for an exception. Form1040ez If you are not sure whether part of your casualty or theft loss will be reimbursed, do not deduct that part until the tax year when you become reasonably certain that it will not be reimbursed. Form1040ez Leased property. Form1040ez   If you lease property from someone else, you can deduct a loss on the property in the year your liability for the loss is fixed. Form1040ez This is true even if the loss occurred or the liability was paid in a different year. Form1040ez You are not entitled to a deduction until your liability under the lease can be determined with reasonable accuracy. Form1040ez Your liability can be determined when a claim for recovery is settled, adjudicated, or abandoned. Form1040ez Example. Form1040ez Robert leased a tractor from First Implement, Inc. Form1040ez , for use in his farm business. Form1040ez The tractor was destroyed by a tornado in June 2012. Form1040ez The loss was not insured. Form1040ez First Implement billed Robert for the fair market value of the tractor on the date of the loss. Form1040ez Robert disagreed with the bill and refused to pay it. Form1040ez First Implement later filed suit in court against Robert. Form1040ez In 2013, Robert and First Implement agreed to settle the suit for $20,000, and the court entered a judgment in favor of First Implement. Form1040ez Robert paid $20,000 in June 2013. Form1040ez He can claim the $20,000 as a loss on his 2013 tax return. Form1040ez Net operating loss (NOL). Form1040ez   If your deductions, including casualty or theft loss deductions, are more than your income for the year, you may have an NOL. Form1040ez An NOL can be carried back or carried forward and deducted from income in other years. Form1040ez See Publication 536 for more information on NOLs. Form1040ez Proof of Loss To deduct a casualty or theft loss, you must be able to prove that there was a casualty or theft. Form1040ez You must have records to support the amount you claim for the loss. Form1040ez Casualty loss proof. Form1040ez   For a casualty loss, your records should show all the following information. Form1040ez The type of casualty (car accident, fire, storm, etc. Form1040ez ) and when it occurred. Form1040ez That the loss was a direct result of the casualty. Form1040ez That you were the owner of the property or, if you leased the property from someone else, that you were contractually liable to the owner for the damage. Form1040ez Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Form1040ez Theft loss proof. Form1040ez   For a theft loss, your records should show all the following information. Form1040ez When you discovered your property was missing. Form1040ez That your property was stolen. Form1040ez That you were the owner of the property. Form1040ez Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Form1040ez Figuring a Gain A casualty or theft may result in a taxable gain. Form1040ez If you receive an insurance payment or other reimbursement that is more than your adjusted basis in the destroyed, damaged, or stolen property, you have a gain from the casualty or theft. Form1040ez You generally report your gain as income in the year you receive the reimbursement. Form1040ez However, depending on the type of property you receive, you may not have to report your gain. Form1040ez See Postponing Gain , later. Form1040ez Your gain is figured as follows: The amount you receive, minus Your adjusted basis in the property at the time of the casualty or theft. Form1040ez Even if the decrease in FMV of your property is smaller than the adjusted basis of your property, use your adjusted basis to figure the gain. Form1040ez Amount you receive. Form1040ez   The amount you receive includes any money plus the value of any property you receive, minus any expenses you have in obtaining reimbursement. Form1040ez It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. Form1040ez Example. Form1040ez A tornado severely damaged your barn. Form1040ez The adjusted basis of the barn was $25,000. Form1040ez Your insurance company reimbursed you $40,000 for the damaged barn. Form1040ez However, you had legal expenses of $2,000 to collect that insurance. Form1040ez Your insurance minus your expenses to collect the insurance is more than your adjusted basis in the barn, so you have a gain. Form1040ez 1) Insurance reimbursement $40,000 2) Legal expenses 2,000 3) Amount received  (line 1 − line 2) $38,000 4) Adjusted basis 25,000 5) Gain on casualty (line 3 − line 4) $13,000 Other Involuntary Conversions In addition to casualties and thefts, other events cause involuntary conversions of property. Form1040ez Some of these are discussed in the following paragraphs. Form1040ez Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes. Form1040ez You report the gain or deduct the loss on your tax return for the year you realize it. Form1040ez However, depending on the type of property you receive, you may not have to report your gain on the involuntary conversion. Form1040ez See Postponing Gain , later. Form1040ez Condemnation Condemnation is the process by which private property is legally taken for public use without the owner's consent. Form1040ez The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take property. Form1040ez The owner receives a condemnation award (money or property) in exchange for the property taken. Form1040ez A condemnation is a forced sale, the owner being the seller and the condemning authority being the buyer. Form1040ez Threat of condemnation. Form1040ez   Treat the sale of your property under threat of condemnation as a condemnation, provided you have reasonable grounds to believe that your property will be condemned. Form1040ez Main home condemned. Form1040ez   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. Form1040ez For information on this exclusion, see Publication 523. Form1040ez If your gain is more than the amount you can exclude, but you buy replacement property, you may be able to postpone reporting the excess gain. Form1040ez See Postponing Gain , later. Form1040ez (You cannot deduct a loss from the condemnation of your main home. Form1040ez ) More information. Form1040ez   For information on how to figure the gain or loss on condemned property, see chapter 1 in Publication 544. Form1040ez Also see Postponing Gain , later, to find out if you can postpone reporting the gain. Form1040ez Irrigation Project The sale or other disposition of property located within an irrigation project to conform to the acreage limits of federal reclamation laws is an involuntary conversion. Form1040ez Livestock Losses Diseased livestock. Form1040ez   If your livestock die from disease, or are destroyed, sold, or exchanged because of disease, even though the disease is not of epidemic proportions, treat these occurrences as involuntary conversions. Form1040ez If the livestock were raised or purchased for resale, follow the rules for livestock discussed earlier under Farming Losses . Form1040ez Otherwise, figure the gain or loss from these conversions using the rules discussed under Determining Gain or Loss in chapter 8. Form1040ez If you replace the livestock, you may be able to postpone reporting the gain. Form1040ez See Postponing Gain below. Form1040ez Reporting dispositions of diseased livestock. Form1040ez   If you choose to postpone reporting gain on the disposition of diseased livestock, you must attach a statement to your return explaining that the livestock were disposed of because of disease. Form1040ez You must also include other information on this statement. Form1040ez See How To Postpone Gain , later, under Postponing Gain . Form1040ez Weather-related sales of livestock. Form1040ez   If you sell or exchange livestock (other than poultry) held for draft, breeding, or dairy purposes solely because of drought, flood, or other weather-related conditions, treat the sale or exchange as an involuntary conversion. Form1040ez Only livestock sold in excess of the number you normally would sell under usual business practice, in the absence of weather-related conditions, are considered involuntary conversions. Form1040ez Figure the gain or loss using the rules discussed under Determining Gain or Loss in chapter 8. Form1040ez If you replace the livestock, you may be able to postpone reporting the gain. Form1040ez See Postponing Gain below. Form1040ez Example. Form1040ez It is your usual business practice to sell five of your dairy animals during the year. Form1040ez This year you sold 20 dairy animals because of drought. Form1040ez The sale of 15 animals is treated as an involuntary conversion. Form1040ez    If you do not replace the livestock, you may be able to report the gain in the following year's income. Form1040ez This rule also applies to other livestock (including poultry). Form1040ez See Sales Caused by Weather-Related Conditions in chapter 3. Form1040ez Tree Seedlings If, because of an abnormal drought, the failure of planted tree seedlings is greater than normally anticipated, you may have a deductible loss. Form1040ez Treat the loss as a loss from an involuntary conversion. Form1040ez The loss equals the previously capitalized reforestation costs you had to duplicate on replanting. Form1040ez You deduct the loss on the return for the year the seedlings died. Form1040ez Postponing Gain Do not report a gain if you receive reimbursement in the form of property similar or related in service or use to the destroyed, stolen, or other involuntarily converted property. Form1040ez Your basis in the new property is generally the same as your adjusted basis in the property it replaces. Form1040ez You must ordinarily report the gain on your stolen, destroyed, or other involuntarily converted property if you receive money or unlike property as reimbursement. Form1040ez However, you can choose to postpone reporting the gain if you purchase replacement property similar or related in service or use to your destroyed, stolen, or other involuntarily converted property within a specific replacement period. Form1040ez If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. Form1040ez To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. Form1040ez If the cost of the replacement property is less than the reimbursement, you must include the gain in your income up to the amount of the unspent reimbursement. Form1040ez Example 1. Form1040ez In 1985, you constructed a barn to store farm equipment at a cost of $20,000. Form1040ez In 1987, you added a silo to the barn at a cost of $15,000 to store grain. Form1040ez In May of this year, the property was worth $100,000. Form1040ez In June the barn and silo were destroyed by a tornado. Form1040ez At the time of the tornado, you had an adjusted basis of $0 in the property. Form1040ez You received $85,000 from the insurance company. Form1040ez You had a gain of $85,000 ($85,000 – $0). Form1040ez You spent $80,000 to rebuild the barn and silo. Form1040ez Since this is less than the insurance proceeds received, you must include $5,000 ($85,000 – $80,000) in your income. Form1040ez Example 2. Form1040ez In 1970, you bought a cabin in the mountains for your personal use at a cost of $18,000. Form1040ez You made no further improvements or additions to it. Form1040ez When a storm destroyed the cabin this January, the cabin was worth $250,000. Form1040ez You received $146,000 from the insurance company in March. Form1040ez You had a gain of $128,000 ($146,000 − $18,000). Form1040ez You spent $144,000 to rebuild the cabin. Form1040ez Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. Form1040ez Buying replacement property from a related person. Form1040ez   You cannot postpone reporting a gain from a casualty, theft, or other involuntary conversion if you buy the replacement property from a related person (discussed later). Form1040ez This rule applies to the following taxpayers. Form1040ez C corporations. Form1040ez Partnerships in which more than 50% of the capital or profits interest is owned by C corporations. Form1040ez Individuals, partnerships (other than those in (2) above), and S corporations if the total realized gain for the tax year on all involuntarily converted properties on which there are realized gains is more than $100,000. Form1040ez For involuntary conversions described in (3) above, gains cannot be offset by any losses when determining whether the total gain is more than $100,000. Form1040ez If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Form1040ez If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Form1040ez Exception. Form1040ez   This rule does not apply if the related person acquired the property from an unrelated person within the period of time allowed for replacing the involuntarily converted property. Form1040ez Related persons. Form1040ez   Under this rule, related persons include, for example, a parent and child, a brother and sister, a corporation and an individual who owns more than 50% of its outstanding stock, and two partnerships in which the same C corporations own more than 50% of the capital or profits interests. Form1040ez For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Form1040ez Death of a taxpayer. Form1040ez   If a taxpayer dies after having a gain, but before buying replacement property, the gain must be reported for the year in which the decedent realized the gain. Form1040ez The executor of the estate or the person succeeding to the funds from the involuntary conversion cannot postpone reporting the gain by buying replacement property. Form1040ez Replacement Property You must buy replacement property for the specific purpose of replacing your property. Form1040ez Your replacement property must be similar or related in service or use to the property it replaces. Form1040ez You do not have to use the same funds you receive as reimbursement for your old property to acquire the replacement property. Form1040ez If you spend the money you receive for other purposes, and borrow money to buy replacement property, you can still choose to postpone reporting the gain if you meet the other requirements. Form1040ez Property you acquire by gift or inheritance does not qualify as replacement property. Form1040ez Owner-user. Form1040ez   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. Form1040ez Examples of property that functions in the same way as the property it replaces are a home that replaces another home, a dairy cow that replaces another dairy cow, and farm land that replaces other farm land. Form1040ez A grinding mill that replaces a tractor does not qualify. Form1040ez Neither does a breeding or draft animal that replaces a dairy cow. Form1040ez Soil or other environmental contamination. Form1040ez   If, because of soil or other environmental contamination, it is not feasible for you to reinvest your insurance money or other proceeds from destroyed or damaged livestock in property similar or related in service or use to the livestock, you can treat other property (including real property) used for farming purposes, as property similar or related in service or use to the destroyed or damaged livestock. Form1040ez Weather-related conditions. Form1040ez   If, because of drought, flood, or other weather-related conditions, it is not feasible for you to reinvest the insurance money or other proceeds in property similar or related in service or use to the livestock, you can treat other property (excluding real property) used for farming purposes, as property similar or related in service or use to the livestock you disposed of. Form1040ez Example. Form1040ez Each year you normally sell 25 cows from your beef herd. Form1040ez However, this year you had to sell 50 cows. Form1040ez This is because a severe drought significantly reduced the amount of hay and pasture yield needed to feed your herd for the rest of the year. Form1040ez Because, as a result of the severe drought, it is not feasible for you to use the proceeds from selling the extra cows to buy new cows, you can treat other property (excluding real property) used for farming purposes, as property similar or related in service or use to the cows you sold. Form1040ez Standing crop destroyed by casualty. Form1040ez   If a storm or other casualty destroyed your standing crop and you use the insurance money to acquire either another standing crop or a harvested crop, this purchase qualifies as replacement property. Form1040ez The costs of planting and raising a new crop qualify as replacement costs for the destroyed crop only if you use the crop method of accounting (discussed in chapter 2). Form1040ez In that case, the costs of bringing the new crop to the same level of maturity as the destroyed crop qualify as replacement costs to the extent they are incurred during the replacement period. Form1040ez Timber loss. Form1040ez   Standing timber you bought with the proceeds from the sale of timber downed as a result of a casualty, such as high winds, earthquakes, or volcanic eruptions, qualifies as replacement property. Form1040ez If you bought the standing timber within the replacement period, you can postpone reporting the gain. Form1040ez Business or income-producing property located in a federally declared disaster area. Form1040ez   If your destroyed business or income-producing property was located in a federally declared disaster area, any tangible replacement property you acquire for use in any business is treated as similar or related in service or use to the destroyed property. Form1040ez For more information, see Disaster Area Losses in Publication 547. Form1040ez Substituting replacement property. Form1040ez   Once you have acquired qualified replacement property that you designate as replacement property in a statement attached to your tax return, you cannot substitute other qualified replacement property. Form1040ez This is true even if you acquire the other property within the replacement period. Form1040ez However, if you discover that the original replacement property was not qualified replacement property, you can, within the replacement period, substitute the new qualified replacement property. Form1040ez Basis of replacement property. Form1040ez   You must reduce the basis of your replacement property (its cost) by the amount of postponed gain. Form1040ez In this way, tax on the gain is postponed until you dispose of the replacement property. Form1040ez Replacement Period To postpone reporting your gain, you must buy replacement property within a specified period of time. Form1040ez This is the replacement period. Form1040ez The replacement period begins on the date your property was damaged, destroyed, stolen, sold, or exchanged. Form1040ez The replacement period generally ends 2 years after the close of the first tax year in which you realize any part of your gain from the involuntary conversion. Form1040ez Example. Form1040ez You are a calendar year taxpayer. Form1040ez While you were on vacation, farm equipment that cost $2,200 was stolen from your farm. Form1040ez You discovered the theft when you returned to your farm on November 11, 2012. Form1040ez Your insurance company investigated the theft and did not settle your claim until January 5, 2013, when they paid you $3,000. Form1040ez You first realized a gain from the reimbursement for the theft during 2013, so you have until December 31, 2015, to replace the property. Form1040ez Main home in disaster area. Form1040ez   For your main home (or its contents) located in a federally declared disaster area, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the involuntary conversion. Form1040ez See Disaster Area Losses , later. Form1040ez Property in the Midwestern disaster areas. Form1040ez   For property located in the Midwestern disaster areas (defined in Table 4 in the 2008 Publication 547) that was destroyed, damaged, stolen, or condemned, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Form1040ez This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Midwestern disaster areas. Form1040ez Property in the Kansas disaster area. Form1040ez   For property located in the Kansas disaster area that was destroyed, damaged, stolen, or condemned after May 3, 2007, as a result of the Kansas storms and tornadoes, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Form1040ez This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Kansas disaster area. Form1040ez Property in the Hurricane Katrina disaster area. Form1040ez   For property located in the Hurricane Katrina disaster area that was destroyed, damaged, stolen, or condemned after August 24, 2005, as a result of Hurricane Katrina, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. Form1040ez This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Form1040ez Weather-related sales of livestock in an area eligible for federal assistance. Form1040ez   For the sale or exchange of livestock due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. Form1040ez The IRS may extend the replacement period on a regional basis if the weather-related conditions continue for longer than 3 years. Form1040ez   For information on extensions of the replacement period because of persistent drought, see Notice 2006-82, 2006-39 I. Form1040ez R. Form1040ez B. Form1040ez 529, available at  www. Form1040ez irs. Form1040ez gov/irb/2006-39_IRB/ar11. Form1040ez html. Form1040ez For a list of counties for which exceptional, extreme, or severe drought was reported during the 12 months ending August 31, 2013, see Notice 2013-62, available at IRS. Form1040ez gov. Form1040ez Condemnation. Form1040ez   The replacement period for a condemnation begins on the earlier of the following dates. Form1040ez The date on which you disposed of the condemned property. Form1040ez The date on which the threat of condemnation began. Form1040ez The replacement period generally ends 2 years after the close of the first tax year in which any part of the gain on the condemnation is realized. Form1040ez But see Main home in disaster area , Property in the Midwestern disaster areas , Property in the Kansas disaster area , and Property in the Hurricane Katrina disaster area , earlier, for exceptions. Form1040ez Business or investment real property. Form1040ez   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the close of the first tax year in which any part of the gain on the condemnation is realized. Form1040ez Extension. Form1040ez   You can apply for an extension of the replacement period. Form1040ez Send your written application to the Internal Revenue Service Center where you file your tax return. Form1040ez See your tax return instructions for the address. Form1040ez Include all the details about your need for an extension. Form1040ez Make your application before the end of the replacement period. Form1040ez However, you can file an application within a reasonable time after the replacement period ends if you can show a good reason for the delay. Form1040ez You will get an extension of the replacement period if you can show reasonable cause for not making the replacement within the regular period. Form1040ez How To Postpone Gain You postpone reporting your gain by reporting your choice on your tax return for the year you have the gain. Form1040ez You have the gain in the year you receive insurance proceeds or other reimbursements that result in a gain. Form1040ez Required statement. Form1040ez   You should attach a statement to your return for the year you have the gain. Form1040ez This statement should include all the following information. Form1040ez The date and details of the casualty, theft, or other involuntary conversion. Form1040ez The insurance or other reimbursement you received. Form1040ez How you figured the gain. Form1040ez Replacement property acquired before return filed. Form1040ez   If you acquire replacement property before you file your return for the year you have the gain, your statement should also include detailed information about all the following items. Form1040ez The replacement property. Form1040ez The postponed gain. Form1040ez The basis adjustment that reflects the postponed gain. Form1040ez Any gain you are reporting as income. Form1040ez Replacement property acquired after return filed. Form1040ez   If you intend to buy replacement property after you file your return for the year you realize gain, your statement should also say that you are choosing to replace the property within the required replacement period. Form1040ez   You should then attach another statement to your return for the year in which you buy the replacement property. Form1040ez This statement should contain detailed information on the replacement property. Form1040ez If you acquire part of your replacement property in one year and part in another year, you must attach a statement to each year's return. Form1040ez Include in the statement detailed information on the replacement property bought in that year. Form1040ez Reporting weather-related sales of livestock. Form1040ez   If you choose to postpone reporting the gain on weather-related sales or exchanges of livestock, show all the following information on a statement attached to your return for the tax year in which you first realize any of the gain. Form1040ez Evidence of the weather-related conditions that forced the sale or exchange of the livestock. Form1040ez The gain realized on the sale or exchange. Form1040ez The number and kind of livestock sold or exchanged. Form1040ez The number of livestock of each kind you would have sold or exchanged under your usual business practice. Form1040ez   Show all the following information and the preceding information on the return for the year in which you replace the livestock. Form1040ez The dates you bought the replacement property. Form1040ez The cost of the replacement property. Form1040ez Description of the replacement property (for example, the number and kind of the replacement livestock). Form1040ez Amended return. Form1040ez   You must file an amended return (Form 1040X) for the tax year of the gain in either of the following situations. Form1040ez You do not acquire replacement property within the replacement period, plus extensions. Form1040ez On this amended return, you must report the gain and pay any additional tax due. Form1040ez You acquire replacement property within the required replacement period, plus extensions, but at a cost less than the amount you receive from the casualty, theft, or other involuntary conversion. Form1040ez On this amended return, you must report the part of the gain that cannot be postponed and pay any additional tax due. Form1040ez Disaster Area Losses Special rules apply to federally declared disaster area losses. Form1040ez A federally declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Robert T. Form1040ez Stafford Disaster Relief and Emergency Assistance Act. Form1040ez It includes a major disaster or emergency declaration under the act. Form1040ez A list of the areas warranting public or individual assistance (or both) under the Act is available at the Federal Emergency Management Agency (FEMA) web site at www. Form1040ez fema. Form1040ez gov. Form1040ez This part discusses the special rules for when to deduct a disaster area loss and what tax deadlines may be postponed. Form1040ez For other special rules, see Disaster Area Losses in Publication 547. Form1040ez When to deduct the loss. Form1040ez   You generally must deduct a casualty loss in the year it occurred. Form1040ez However, if you have a deductible loss from a disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct that loss on your return or amended return for the tax year immediately preceding the tax year in which the disaster happened. Form1040ez If you make this choice, the loss is treated as having occurred in the preceding year. Form1040ez    Claiming a qualifying disaster loss on the previous year's return may result in a lower tax for that year, often producing or increasing a cash refund. Form1040ez   You must make the choice to take your casualty loss for the disaster in the preceding year by the later of the following dates. Form1040ez The due date (without extensions) for filing your tax return for the tax year in which the disaster actually occurred. Form1040ez The due date (with extensions) for the return for the preceding tax year. Form1040ez Federal disaster relief grants. Form1040ez   Do not include post-disaster relief grants received under the Robert T. Form1040ez Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, or funeral expenses. Form1040ez Do not deduct casualty losses or medical expenses to the extent they are specifically reimbursed by these disaster relief grants. Form1040ez If the casualty loss was specifically reimbursed by the grant and you received the grant after the year in which you deducted the casualty loss, see Reimbursement received after deducting loss , earlier. Form1040ez Unemployment assistance payments under the Act are taxable unemployment compensation. Form1040ez Qualified disaster relief payments. Form1040ez   Qualified disaster relief payments are not included in the income of individuals to the extent any expenses compensated by these payments are not otherwise compensated for by insurance or other reimbursement. Form1040ez These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Form1040ez No withholding applies to these payments. Form1040ez   Qualified disaster relief payments include payments you receive (regardless of the source) for the following expenses. Form1040ez Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a federally declared disaster. Form1040ez Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a federally declared disaster. Form1040ez (A personal residence can be a rented residence or one you own. Form1040ez ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a federally declared disaster. Form1040ez   Qualified disaster relief payments include amounts paid by a federal, state, or local government in connection with a federally declared disaster to individuals affected by the disaster. Form1040ez    Qualified disaster relief payments do not include: Payments for expenses otherwise paid for by insurance or other reimbursements, or Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation. Form1040ez Qualified disaster mitigation payments. Form1040ez   Qualified disaster mitigation payments made under the Robert T. Form1040ez Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not included in income. Form1040ez These are payments you, as a property owner, receive to reduce the risk of future damage to your property. Form1040ez You cannot increase your basis in property, or take a deduction or credit, for expenditures made with respect to those payments. Form1040ez Sale of property under hazard mitigation program. Form1040ez   Generally, if you sell or otherwise transfer property, you must recognize any gain or loss for tax purposes unless the property is your main home. Form1040ez You report the gain or deduct the loss on your tax return for the year you realize it. Form1040ez (You cannot deduct a loss on personal-use property unless the loss resulted from a casualty, as discussed earlier. Form1040ez ) However, if you sell or otherwise transfer property to the Federal Government, a state or local government, or an Indian tribal government under a hazard mitigation program, you can choose to postpone reporting the gain if you buy qualifying replacement property within a certain period of time. Form1040ez See Postponing Gain , earlier, for the rules that apply. Form1040ez Other federal assistance programs. Form1040ez    For more information about other federal assistance programs, see Crop Insurance and Crop Disaster Payments and Feed Assistance and Payments in chapter 3 earlier. Form1040ez Postponed tax deadlines. Form1040ez   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. Form1040ez The tax deadlines the IRS may postpone include those for filing income, excise, and employment tax returns, paying income, excise, and employment taxes, and making contributions to a traditional IRA or Roth IRA. Form1040ez   If any tax deadline is postponed, the IRS will publicize the postponement in your area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Form1040ez Go to http://www. Form1040ez irs. Form1040ez gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. Form1040ez Who is eligible. Form1040ez   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Form1040ez Any individual whose main home is located in a covered disaster area (defined next). Form1040ez Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. Form1040ez Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered disaster area. Form1040ez Any individual, business entity, or sole proprietorship whose records are needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. Form1040ez The main home or principal place of business does not have to be located in the covered disaster area. Form1040ez Any estate or trust that has tax records necessary to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. Form1040ez The spouse on a joint return with a taxpayer who is eligible for postponements. Form1040ez Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose necessary records to meet a postponed tax deadline are located in the covered disaster area. Form1040ez Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. Form1040ez Any other person determined by the IRS to be affected by a federally declared disaster. Form1040ez Covered disaster area. Form1040ez   This is an area of a federally declared disaster area in which the IRS has decided to postpone tax deadlines for up to 1 year. Form1040ez Abatement of interest and penalties. Form1040ez   The IRS may abate the interest and penalties on the underpaid income tax for the length of any postponement of tax deadlines. Form1040ez Reporting Gains and Losses You will have to file one or more of the following forms to report your gains or losses from involuntary conversions. Form1040ez Form 4684. Form1040ez   Use this form to report your gains and losses from casualties and thefts. Form1040ez Form 4797. Form1040ez   Use this form to report involuntary conversions (other than from casualty or theft) of property used in your trade or business and capital assets held in connection with a trade or business or a transaction entered into for profit. Form1040ez Also use this form if you have a gain from a casualty or theft on trade, business or income-producing property held for more than 1 year and you have to recapture some or all of your gain as ordinary income. Form1040ez Form 8949. Form1040ez   Use this form to report gain from an involuntary conversion (other than from casualty or theft) of personal-use property. Form1040ez Schedule A (Form 1040). Form1040ez   Use this form to deduct your losses from casualties and thefts of personal-use property and income-producing property, that you reported on Form 4684. Form1040ez Schedule D (Form 1040). Form1040ez   Use this form to carry over the following gains. Form1040ez Net gain shown on Form 4797 from an involuntary conversion of business property held for more than 1 year. Form1040ez Net gain shown on Form 4684 from the casualty or theft of personal-use property. Form1040ez    Also use this form to figure the overall gain or loss from transactions reported on Form 8949. Form1040ez Schedule F (Form 1040). Form1040ez   Use this form to deduct your losses from casualty or theft of livestock or produce bought for sale under Other expenses in Part II, line 32, if you use the cash method of accounting and have not otherwise deducted these losses. Form1040ez Prev  Up  Next   Home   More Online Publications