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Casualty, Disaster, and Theft Loss Workbook, Publication 584 (12/2008)

What's New for 2008

Waiver of $100 and 10% of adjusted gross income limits. The $100 and 10% of adjusted gross income limits do not apply to losses of personal use property that arose in the Kansas disaster area or a Midwestern disaster area. The 10% limit does not apply to losses of personal use property attributable to federally declared disasters declared in tax years beginning after 2007 and that occur before 2010. (The $100 limit, however, does apply.) See Deduction limits later. For more information about these disasters, see Publication 547.

What's New for 2009

Increase in $100 personal casualty and theft loss limit. Generally, a personal casualty or theft loss must exceed $500 to be allowed for 2009. This is in addition to the 10% of adjusted gross income limit that generally applies to the net loss.

Introduction

This workbook is designed to help you figure your loss on personal-use property in the event of a disaster, casualty, or theft. It contains schedules to help you figure the loss to your main home, its contents, and your motor vehicles. However, these schedules are for your information only. You must complete Form 4684, Casualties and Thefts, to report your loss.

How To Use This Workbook

You can use this workbook by following these five steps.

Read Publication 547 to learn about the tax rules for casualties, disasters, and thefts.
Know the definitions of cost or other basis and fair market value, discussed later.
Fill out Schedules 1 through 20.
Read the instructions for Form 4684.
Fill out Form 4684 using the information you entered in Schedules 1 through 20.

Use the chart below to find out how to use Schedules 1 through 19 to fill out Form 4684.

Take what's in each row of...	*And enter it on Form 4684...*
Column 1	Line 1
Column 2	Line 2
Column 3	Line 3
Column 4	Line 4
Column 5	Line 5
Column 6	Line 6
Column 7	Line 7
Column 8	Line 8
Column 9	Line 9

Losses

Generally, you may deduct losses to your home, household goods, and motor vehicles on your federal income tax return. However, you may not deduct a casualty or theft loss that is covered by insurance unless you filed a timely insurance claim for reimbursement. Any reimbursement you receive will reduce the loss. If you did not file an insurance claim, you may deduct only the part of the loss that was not covered by insurance.

Amount of loss.

You figure the amount of your loss using the following steps.

Determine your cost or other basis in the property before the casualty or theft.
Determine the decrease in fair market value (FMV) of the property as a result of the casualty or theft. (The decrease in FMV is the difference between the property's value immediately before and immediately after the casualty or theft.)
From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive.

Apply the deduction limits, discussed later, to determine the amount of your deductible loss.

Cost or other basis.

Cost or other basis usually means original cost plus improvements. If you did not acquire the property by purchasing it, your basis is determined as discussed in Publication 551, Basis of Assets.

Fair market value.

FMV is the price for which you could sell your property to a willing buyer, when neither of you has to sell or buy and both of you know all the relevant facts. When filling out Schedules 1 through 20, you need to know the FMV of the property immediately before and immediately after the disaster, casualty, or theft.

Separate computations.

Generally, if a single casualty or theft involves more than one item of property, you must figure the loss on each item separately. Then combine the losses to determine the total loss from that casualty or theft.

Exception for personal-use real property.

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. Figure the loss using the smaller of the following.

The decrease in FMV of the entire property.
The adjusted basis of the entire property.

Deduction limits.

After you have figured the amount of your loss, as discussed earlier, you must figure how much of the loss you can deduct. You do this on Form 4684, section A. If the loss was to property for your personal use or your family's, there are two limits on the amount you can deduct for your casualty or theft loss.

You must reduce each casualty or theft loss by $100 ($100 rule). (This amount increases to $500 for 2009.)
You must further reduce the total of all your losses by 10% of your adjusted gross income (10% rule).

The above limits do not apply if your loss arose in the Kansas disaster area or a Midwestern disaster area. Furthermore, the 10% limit does not apply if your loss is a net disaster loss attributable to a federally declared disaster. (The limit in (1) above does apply.)

More information.

For more information about the deduction limits, see Publication 547.

When your loss is deductible.

You can generally deduct a casualty or disaster area loss only in the tax year in which the casualty or disaster occurred. You can generally deduct a theft loss only in the year you discovered your property was stolen. However, you can choose to deduct disaster area losses on your return for the year immediately before the year of the disaster if the President has declared your area a federal disaster area. For details, see Disaster Area Losses in Publication 547.

Publication 584 - Additional Material

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Entrance Hall

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Living Room

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Dining Room

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Kitchen

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Den

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Bedrooms

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Bathrooms

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Recreation Room

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Laundry and Basement

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Garage

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Sporting Equipment

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Men's Clothing

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Women's Clothing

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Children's Clothing

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Jewelry

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Electrical Appliances

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Linens

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Miscellaneous

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Motor Vehicles

Schedule 20. Home (Excluding Contents)

Note. If you used the entire property as your home, fill out only column (a). If you used part of the property as your home and part of it for business or to produce rental income, you must allocate the entries on lines 2-9 between the personal part (column (a)) and the business/rental part (column (b)).
1.	Description of property (Show location and date acquired.)	(a) Personal Part	(b) Business/Rental Part
2.	Cost or other (adjusted) basis of property (from Worksheet A)
3.	Insurance or other reimbursement Note. If line 2 is more than line 3, skip line 4. If line 3 is more than line 2, you exclude gain, and the gain is more than you can exclude, see the instructions for line 3 in the Instructions for Form 4684 for the amount to enter.
4.	Gain from casualty. If line 3 is more than line 2, enter the difference here and skip lines 5 through 9. But see Next below line 9.
5.	Fair market value before casualty
6.	Fair market value after casualty
7.	Decrease in fair market value. Subtract line 6 from line 5.
8.	Enter the smaller of line 2 or line 7 Note for business/rental part. If the property was totally destroyed by casualty, enter on line 8, column (b) the amount from line 2, column (b).
9.	Subtract line 3 from line 8. If zero or less, enter -0-.
Next: Transfer the entries from line 1 and lines 2-9, column (a), above to the corresponding lines on Form 4684, Section A. Transfer the entries from line 1 and lines 2-9, column (b), to the corresponding lines on Form 4684, Section B.

Worksheet A. Cost or Other (Adjusted) Basis

Caution.See the Worksheet A Instructions before you use this worksheet.

				(a) Personal Part	(b) Business/Rental Part
1.		Enter the purchase price of the home damaged or destroyed. (If you filed Form 2119 when you originally acquired that home to postpone gain on the sale of a previous home before May 7, 1997, enter the adjusted basis of the new home from that Form 2119.)	1.
2.		Seller paid points for home bought after 1990. Do not include any seller-paid points you already subtracted to arrive at the amount entered on line 1	2.
3.		Subtract line 2 from line 1	3.
4.		Settlement fees or closing costs. (See Settlement costs in Publication 551.) If line 1 includes the adjusted basis of the new home from Form 2119, skip lines 4a-4g and 5; go to line 6.
	a.	Abstract and recording fees	4a.
	b.	Legal fees (including fees for title search and preparing documents)	4b.
	c.	Survey fees	4c.
	d.	Title insurance	4d.
	e.	Transfer or stamp taxes	4e.
	f.	Amounts that the seller owed that you agreed to pay (back taxes or interest, recording or mortgage fees, and sales commissions)	4f.
	g.	Other	4g.
5.		Add lines 4a through 4g	5.
6.		Cost of additions and improvements. (See Increases to Basis in Publication 551.) Do not include any additions and improvements included on line 1	6.
7.		Special tax assessments paid for local improvements, such as streets and sidewalks	7.
8.		Other increases to basis	8.
9.		Add lines 3, 5, 6, 7, and 8	9.
10.		Depreciation allowed or allowable, related to the business use or rental of the home	10.	0
11.		Other decreases to basis (See Decreases to Basis in Publication 551.)	11.
12.		Add lines 10 and 11	12.
13.		Cost or other (adjusted) basis of home damaged or destroyed. Subtract line 12 from line 9. Enter here and on Schedule 20, line 2	13.

Worksheet A Instructions.

If you use Worksheet A to figure the cost or other (adjusted) basis of your home, follow these instructions.

IF...		THEN...
you inherited your home	1	skip lines 1–4 of the worksheet.
2	find your basis using the rules under Inherited Property in Publication 551. Enter this amount on line 5 of the worksheet.
3	fill out lines 6–13 of the worksheet.
you received your home as a gift	1	read Property Received as a Gift in Publication 551 and enter on lines 1 and 3 of the worksheet either the donor's adjusted basis or the home's fair market value at the time of the gift, whichever is appropriate.
2	if you can add any federal gift tax to your basis, enter that amount on line 5 of the worksheet.
3	fill out the rest of the worksheet.
you received your home as a trade for other property	1	enter on line 1 of the worksheet the fair market value of the other property at the time of the trade. (But if you received your home as a trade for your previous home before May 7, 1997, and had a gain on the trade that you postponed using Form 2119, enter on line 1 of the worksheet the adjusted basis of the new home from that Form 2119.)
2	fill out the rest of the worksheet.
you built your home	1	add the purchase price of the land and the cost of building the home. Enter that total on line 1 of the worksheet. (However, if you filed a Form 2119 to postpone gain on the sale of a previous home before May 7, 1997, enter on line 1 of the worksheet the adjusted basis of the new home from that Form 2119.)
2	fill out the rest of the worksheet.
you received your home from your spouse after July 18, 1984	1	skip lines 1–4 of the worksheet.
2	enter on line 5 of the worksheet your spouse's cost or other (adjusted) basis in the home just before you received it.
3	fill out lines 6–13 of the worksheet, making adjustments to basis only for events after the transfer.
you owned a home jointly with your spouse, who transferred his or her interest in the home to you after July 18, 1984
	fill out one worksheet, including adjustments to basis for events both before and after the transfer.

you received your home from your spouse before July 19, 1984	1	skip lines 1–4 of the worksheet.
2	enter on line 5 of the worksheet the home's fair market value at the time you received it.
3	fill out lines 6–13 of the worksheet, making adjustments to basis only for events after the transfer.
you owned a home jointly with your spouse, and your spouse transferred his or her interest in the home to you before July 19, 1984	1	fill out a worksheet, lines 1–13, making adjustments to basis only for events before the transfer.
2	multiply the amount on line 13 of that worksheet by 50% (0.50) to get the adjusted basis of your half-interest at the time of the transfer.
3	multiply the fair market value of the home at the time of the transfer by 50% (0.50). Generally, this is the basis of the half-interest that your spouse owned.
4	add the amounts from steps 2 and 3 and enter the total on line 5 of a second worksheet.
5	complete lines 6–13 of the second worksheet, making adjustments to basis only for events after the transfer.

Worksheet A Instructions.(Continued)

IF...		THEN...
you owned your home jointly with your spouse who died before the casualty	1	fill out a worksheet, lines 1–13, making adjustments to basis only for events before your spouse's death.
2	multiply the amount on line 13 of that worksheet by 50% (0.50) to get the adjusted basis of your half-interest on the date of death.
3	figure the basis for the half-interest owned by your spouse. This is one-half of the fair market value on the date of death (or alternate valuation date). (The basis in your half will remain one-half of the adjusted basis determined in step 2.)
4	add the amounts from steps 2 and 3 and enter the total on line 5 of a second worksheet.
5	complete lines 6–13 of the second worksheet, making adjustments to basis only for events after your spouse's death.
you owned your home jointly with your spouse who died before the casualty, and your permanent home is in a community property state	1	skip lines 1–4 of the worksheet.
2	enter the amount of your basis on line 5 of the worksheet. Generally, this is the fair market value of the home at the time of death. (But see Community Property in Publication 551 for special rules.)
3	fill out lines 6–13 of the worksheet, making adjustments to basis only for events after your spouse's death.
your home was ever damaged as a result of a prior casualty	1	on line 8 of the worksheet, enter any amounts you spent to restore the home to its condition before the prior casualty.
2	on line 11 enter: any insurance reimbursements you received (or expect to receive) for the prior loss, and any deductible casualty losses from prior years not covered by insurance.
the person who sold you your home paid points on your loan and you bought your home after 1990 but before April 4, 1994.		on line 2 enter the seller-paid points only if you deducted them as home mortgage interest in the year paid (unless you used the seller-paid points to reduce the amount on line 1).
the person who sold you your home paid points on your loan and you bought your home after April 3, 1994		on line 2 enter the seller-paid points even if you did not deduct them (unless you used the seller-paid points to reduce the amount on line 1).
you used part of the property as your home and part of it for business or to produce rental income		you must allocate the entries on Worksheet A between the personal part (column (a)) and the business/rental part (column (b)).
none of these items apply		fill out the entire worksheet.

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