Pub 547

Publication 547

Contents

Casualties,
Disasters,
and Thefts

What's New

Cat. No. 15090K
Department
of the
Treasury
Internal
Revenue
Service

.................. 1

Reminders . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . 1
Casualty

.................... 2

Theft . . . . . . . . . . . . . . . . . . . . . . . 3
Loss on Deposits . . . . . . . . . . . . . . . 4

For use in preparing

2013 Returns

Proof of Loss

................. 4

Figuring a Loss . . . . . . . . . . . . . . . . 4
Deduction Limits . . . . . . . . . . . . . . . 8
Figuring a Gain . . . . . . . . . . . . . . . 10
When To Report Gains and
Losses . . . . . . . . . . . . . . . . . 13
Disaster Area Losses

. . . . . . . . . . . 13

How To Report Gains and Losses . . . . 15
How To Get Tax Help
Index

. . . . . . . . . . . 16

. . . . . . . . . . . . . . . . . . . . . 18

What's New
Section C of Form 4684 for Ponzi-type investment schemes. Section C of Form 4684
is new for 2013. You must complete Section C if
you are claiming a theft loss deduction due to a
Ponzi-type investment scheme and are using
Revenue Procedure 2009-20, as modified by
Revenue Procedure 2011-58. Section C of
Form 4684 replaces Appendix A in Revenue
Procedure 2009-20. You do not need to complete Appendix A. For details, see Losses from
Ponzi-type investment schemes, later.

Reminders
Future developments. For the latest information about developments related to Publication
547, such as legislation enacted after it was
published, go to www.irs.gov/pub547.
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(1-800-843-5678) if you recognize a child.

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Internet at IRS.gov
Dec 20, 2013

Introduction
This publication explains the tax treatment of
casualties, thefts, and losses on deposits. A
casualty occurs when your property is damaged
as a result of a disaster such as a storm, fire,

car accident, or similar event. A theft occurs
when someone steals your property. A loss on
deposits occurs when your financial institution
becomes insolvent or bankrupt.
This publication discusses the following topics.
Definitions of a casualty, theft, and loss on
deposits.
How to figure the amount of your gain or
loss.
How to treat insurance and other reimbursements you receive.
The deduction limits.
When and how to report a casualty or theft.
The special rules for disaster area losses.
Forms to file. Generally, when you have a
casualty or theft, you have to file Form 4684.
You may also have to file one or more of the following forms.
Schedule A (Form 1040).

Ordering forms and publications. Visit
www.irs.gov/formspubs/ to download forms and
publications,
call
1-800-TAX-FORM
(1-800-829-3676), or write to the address below
and receive a response within 10 days after
your request is received.
Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613

Volcanic eruptions.

You may want to see:
Publication

550 Investment Income and Expenses

Comments and suggestions. We welcome
your comments about this publication and your
suggestions for future editions.
You can write to us at the following address:
Internal Revenue Service
Tax Forms and Publications Division
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Washington, DC 20224
We respond to many letters by telephone.
Therefore, it would be helpful if you would include your daytime phone number, including
the area code, in your correspondence.
You can send your comments from
www.irs.gov/formspubs/. Click on “More Information” and then on “Comment on Tax Forms
and Publications”.
Although we cannot respond individually to
each comment received, we do appreciate your
feedback and will consider your comments as
we revise our tax products.

Page 2

Shipwrecks.

Useful Items

Form 4797.

Workbooks for casualties and thefts. Publication 584, Casualty, Disaster, and Theft Loss
Workbook (Personal-Use Property), is available
to help you make a list of your stolen or damaged personal-use property and figure your
loss. It includes schedules to help you figure the
loss on your home and its contents, and your
motor vehicles.
Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook, is available to
help you make a list of your stolen or damaged
business or income-producing property and figure your loss.

Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under
Disaster Area Losses, later.
Mine cave-ins.
Sonic booms.

523 Selling Your Home

Condemnations. For information on condemnations of property, see Involuntary Conversions in chapter 1 of Publication 544, Sales and
Other Dispositions of Assets.

Fires (but see Nondeductible losses, next,
for exceptions).
Floods.

Tax questions. If you have a tax question,
check the information available on IRS.gov or
call 1-800-829-1040. We cannot answer tax
questions sent to either of the above addresses.

Form 1040NR, Schedule A (for nonresident aliens).
Schedule D.
For details on which form to use, see How To
Report Gains and Losses, later.

Earthquakes.

525 Taxable and Nontaxable Income
551 Basis of Assets
584 Casualty, Disaster, and Theft Loss
Workbook (Personal-Use Property)
584-B Business Casualty, Disaster, and
Theft Loss Workbook
Form (and Instructions)
Schedule A (Form 1040) Itemized
Deductions
Form 1040NR, Schedule A Itemized
Deductions (for nonresident aliens)
Schedule D (Form 1040) Capital Gains
and Losses
4684 Casualties and Thefts
4797 Sales of Business Property
See How To Get Tax Help near the end of this
publication for information about getting publications and forms.

Casualty
A casualty is the damage, destruction, or loss of
property resulting from an identifiable event that
is sudden, unexpected, or unusual.
A sudden event is one that is swift, not
gradual or progressive.
An unexpected event is one that is ordinarily unanticipated and unintended.
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.
Generally, casualty losses are deductible
during the taxable year that the loss occurred.
See Table 3, later.
Deductible losses. Deductible casualty losses can result from a number of different causes, including the following.
Car accidents (but see Nondeductible losses, next, for exceptions).

Storms, including hurricanes and tornadoes.
Terrorist attacks.
Vandalism.

Nondeductible losses. A casualty loss is not
deductible if the damage or destruction is
caused by the following.
Accidentally breaking articles such as
glassware or china under normal conditions.
A family pet (explained below).
A fire if you willfully set it, or pay someone
else to set it.
A car accident if your willful negligence or
willful act caused it. The same is true if the
willful act or willful negligence of someone
acting for you caused the accident.
Progressive deterioration (explained below). However, see Special Procedure for
Damage From Corrosive Drywall, later.
Family pet. Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed
earlier under Casualty are met.
Example. Your antique oriental rug was
damaged by your new puppy before it was
housebroken. Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss.
Progressive deterioration. Loss of property due to progressive deterioration is not deductible as a casualty loss. This is because the
damage results from a steadily operating cause
or a normal process, rather than from a sudden
event. The following are examples of damage
due to progressive deterioration.
The steady weakening of a building due to
normal wind and weather conditions.
The deterioration and damage to a water
heater that bursts. However, the rust and
water damage to rugs and drapes caused
by the bursting of a water heater does
qualify as a casualty.
Most losses of property caused by
droughts. To be deductible, a drought-related loss generally must be incurred in a
trade or business or in a transaction entered into for profit.
Termite or moth damage.
The damage or destruction of trees,
shrubs, or other plants by a fungus, disease, insects, worms, or similar pests.
However, a sudden destruction due to an

Publication 547 (2013)

unexpected or unusual infestation of beetles or other insects may result in a
casualty loss.

Special Procedure for
Damage From Corrosive
Drywall
Under a special procedure, you can deduct the
amounts you paid to repair damage to your
home and household appliances due to corrosive drywall. Under this procedure, you treat the
amounts paid for repairs as a casualty loss in
the year of payment. For example, amounts you
paid for repairs in 2013 are deductible on your
2013 tax return and amounts you paid for repairs in 2012 are deductible on your 2012 tax
return.
Note. If you paid for any repairs before
2013 and you choose to follow this special procedure, you can amend your return for the earlier year by filing Form 1040X, Amended U.S.
Individual Income Tax Return, and attaching a
completed Form 4684 for the appropriate year.
Form 4684 for the appropriate year can be
found at IRS.gov. Generally, Form 1040X must
be filed within 3 years after the date the original
return was filed or within 2 years after the date
the tax was paid, whichever is later.
Corrosive drywall. For purposes of this special procedure, “corrosive drywall” means drywall that is identified as problem drywall under
the two-step identification method published by
the Consumer Product Safety Commission
(CPSC) and the Department of Housing and Urban Development (HUD) in their interim guidance dated January 28, 2010, as revised by the
CPSC and HUD. The revised identification
guidance and remediation guidelines are available at www.cpsc.gov/Safety-Education/SafetyEducation-Centers/Drywall.
Special instructions for completing Form
4684. If you choose to follow this special procedure, complete Form 4684, Section A, according to the instructions below. The IRS will
not challenge your treatment of damage resulting from corrosive drywall as a casualty loss if
you determine and report the loss as explained
below.
Top margin of Form 4684. Enter “Revenue Procedure 2010-36”.
Line 1. Enter the information required by
the line 1 instructions.
Line 2. Skip this line.
Line 3. Enter the amount of insurance or
other reimbursements you received (including
through litigation). If none, enter -0-.
Lines 4–7. Skip these lines.
Line 8. Enter the amount you paid to repair
the damage to your home and household appliances due to corrosive drywall. Enter only the
amounts you paid to restore your home to the
condition existing immediately before the damage. Do not enter any amounts you paid for improvements or additions that increased the
value of your home above its pre-loss value. If
Publication 547 (2013)

you replaced a household appliance instead of
repairing it, enter the lesser of:
The current cost to replace the original appliance, or
The basis of the original appliance (generally its cost).
Line 9. If line 8 is more than line 3, do one
of the following.
1. If you have a pending claim for reimbursement (or you intend to pursue reimbursement), enter 75% of the difference between lines 3 and 8.
2. If item (1) does not apply to you, enter the
full amount of the difference between lines
3 and 8.
If line 8 is less than or equal to line 3, you cannot claim a casualty loss deduction using this
special procedure.
If you have a pending claim for reimbursement (or you intend to pursue reCAUTION
imbursement), you may have income
or an additional deduction in a later tax year depending on the actual amount of reimbursement
received. See Reimbursement Received After
Deducting Loss, later.

!

Lines 10–18. Complete these lines according to the Instructions for Form 4684.
Choosing not to follow this special procedure. If you choose not to follow this special
procedure, you are subject to all of the provisions that apply to the deductibility of casualty
losses, and you must complete lines 1–9 according to the Instructions for Form 4684. This
means, for example, that you must establish
that the damage, destruction, or loss of property
resulted from an identifiable event as defined
earlier under Casualty. Furthermore, you must
have proof that shows the following.
The loss is properly deductible in the tax
year you claimed it and not in some other
year. See When To Report Gains and Losses, later.
The amount of the claimed loss. See Proof
of Loss, later.
No claim for reimbursement of any portion
of the loss exists for which there is a reasonable prospect of recovery. See When
To Report Gains and Losses, later.

Theft
A theft is the taking and removing of money or
property with the intent to deprive the owner of
it. 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. You
do not need to show a conviction for theft.
Theft includes the taking of money or property by the following means.
Blackmail.

Robbery.
The taking of money or property through fraud
or misrepresentation is theft if it is illegal under
state or local law.
Decline in market value of stock. 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. 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. You report a capital loss on Schedule D (Form 1040).
For more information about stock sales, worthless stock, and capital losses, see chapter 4 of
Publication 550.
Mislaid or lost property. The simple disappearance of money or property is not a theft.
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. Sudden, unexpected, and
unusual events were defined earlier under
Casualty.
Example. A car door is accidentally slammed on your hand, breaking the setting of your
diamond ring. The diamond falls from the ring
and is never found. The loss of the diamond is a
casualty.
Losses
from
Ponzi-type
investment
schemes. The IRS has issued the following
guidance to assist taxpayers who are victims of
losses from Ponzi-type investment schemes:
Revenue Ruling 2009-9, 2009-14 I.R.B.
735 (available at www.irs.gov/irb/
2009-14_IRB/ar07.html).
Revenue Procedure 2009-20, 2009-14
I.R.B. 749 (available at www.irs.gov/irb/
2009-14_IRB/ar11.html).
Revenue Procedure 2011-58, 2011-50
I.R.B. 847 (available at www.irs.gov/irb/
2011-50_IRB/ar11.html).
If you qualify to use Revenue Procedure
2009-20, as modified by Revenue Procedure
2011-58, and you choose to follow the procedures in the guidance, first fill out Section C of
Form 4684 to determine the amount to enter on
Section B, line 28. Skip lines 19 to 27, but you
must fill out Section B, lines 29 to 39, as appropriate. Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. You do
not need to complete Appendix A. For more information, see the above revenue ruling and
revenue procedures, and the Instructions for
Form 4684.
If you choose not to use the procedures in
Revenue Procedure 2009-20, as modified by
Revenue Procedure 2011-58, you may claim
your theft loss by filling out Section B, lines 19
to 39, as appropriate.

Burglary.
Embezzlement.
Extortion.
Kidnapping for ransom.
Larceny.
Page 3

Table 1. Reporting Loss on Deposits
IF you choose to report the loss as a(n)...

THEN report it on...

casualty loss

Form 4684 and Schedule A
(Form 1040).

ordinary loss

Schedule A (Form 1040).

nonbusiness bad debt

Form 8949 and Schedule D (Form 1040).

Loss on Deposits
A loss on deposits can occur when a bank,
credit union, or other financial institution becomes insolvent or bankrupt. If you incurred this
type of loss, you can choose one of the following ways to deduct the loss.
As a casualty loss.
As an ordinary loss.
As a nonbusiness bad debt.
Casualty loss or ordinary loss. You can
choose to deduct a loss on deposits as a casualty loss or as an ordinary loss for any year in
which you can reasonably estimate how much
of your deposits you have lost in an insolvent or
bankrupt financial institution. The choice generally is made on the return you file for that year
and applies to all your losses on deposits for
the year in that particular financial institution. If
you treat the loss as a casualty or ordinary loss,
you cannot treat the same amount of the loss as
a nonbusiness bad debt when it actually becomes worthless. However, you can take a
nonbusiness bad debt deduction for any
amount of loss that is more than the estimated
amount you deducted as a casualty or ordinary
loss. Once you make the choice, you cannot
change it without permission from the Internal
Revenue Service.
If you claim an ordinary loss, report it as a
miscellaneous itemized deduction on Schedule A (Form 1040), line 23. The maximum
amount you can claim is $20,000 ($10,000 if
you are married filing separately) reduced by
any expected state insurance proceeds. Your
loss is subject to the 2%-of-adjusted-gross-income limit. You cannot choose to claim an ordinary loss if any part of the deposit is federally
insured.
Nonbusiness bad debt. If you do not choose
to deduct the loss as a casualty loss or as an ordinary loss, you must wait until the year the actual loss is determined and deduct the loss as a
nonbusiness bad debt in that year.
How to report. The kind of deduction you
choose for your loss on deposits determines
how you report your loss. See Table 1.
More information. For more information, see
Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the
Instructions for Form 4684.
Deducted loss recovered. If you recover an
amount you deducted as a loss in an earlier
year, you may have to include the amount recovered in your income for the year of recovery.
If any part of the original deduction did not reduce your tax in the earlier year, you do not
Page 4

have to include that part of the recovery in your
income. For more information, see Recoveries
in Publication 525.

Proof of Loss
To deduct a casualty or theft loss, you must be
able to show that there was a casualty or theft.
You also must be able to support the amount
you take as a deduction.
Casualty loss proof. For a casualty loss, you
should be able to show all of the following.
The type of casualty (car accident, fire,
storm, etc.) and when it occurred.
That the loss was a direct result of the
casualty.
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.
Whether a claim for reimbursement exists
for which there is a reasonable expectation
of recovery.
Theft loss proof. For a theft loss, you should
be able to show all of the following.
When you discovered that your property
was missing.
That your property was stolen.
That you were the owner of the property.
Whether a claim for reimbursement exists
for which there is a reasonable expectation
of recovery.
It is important that you have records
that will prove your deduction. If you
RECORDS
do not have the actual records to support your deduction, you can use other satisfactory evidence to support it.

Figuring a Loss
To determine your deduction for a casualty or
theft loss, you must first figure your loss.
Amount of loss. Figure the amount of your
loss using the following steps.
1. Determine your adjusted basis in the property before the casualty or theft.
2. Determine the decrease in fair market
value (FMV) of the property as a result of
the casualty or theft.
3. From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received
or expect to receive.
For personal-use property and property used in
performing services as an employee, apply the

deduction limits, discussed later, to determine
the amount of your deductible loss.
Gain from reimbursement. If your reimbursement is more than your adjusted basis in
the property, you have a gain. This is true even
if the decrease in the FMV of the property is
smaller than your adjusted basis. If you have a
gain, you may have to pay tax on it, or you may
be able to postpone reporting the gain. See Figuring a Gain, later.
Business or income-producing property.
If you have business or income-producing property, such as rental property, and it is stolen or
completely destroyed, the decrease in FMV is
not considered. 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
Loss of inventory. There are two ways
you can deduct a casualty or theft loss of inventory, including items you hold for sale to customers.
One way is to deduct the loss through the increase in the cost of goods sold by properly reporting your opening and closing inventories.
Do not claim this loss again as a casualty or
theft loss. If you take the loss through the increase in the cost of goods sold, include any insurance or other reimbursement you receive for
the loss in gross income.
The other way is to deduct the loss separately. If you deduct it separately, eliminate the
affected inventory items from the cost of goods
sold by making a downward adjustment to
opening inventory or purchases. Reduce the
loss by the reimbursement you received. Do not
include the reimbursement in gross income. If
you do not receive the reimbursement by the
end of the year, you may not claim a loss to the
extent you have a reasonable prospect of recovery.
Leased property. If you are liable for casualty damage to property you lease, your loss is
the amount you must pay to repair the property
minus any insurance or other reimbursement
you receive or expect to receive.
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.

Publication 547 (2013)

See Real property under Figuring the Deduction, later.

Decrease in
Fair Market Value
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.
The decrease in FMV used to figure the
amount of a casualty or theft loss is the difference between the property's fair market value
immediately before and immediately after the
casualty or theft.
FMV of stolen property. The FMV of property
immediately after a theft is considered to be
zero because you no longer have the property.
Example. Several years ago, you purchased silver dollars at face value for $150.
This is your adjusted basis in the property. Your
silver dollars were stolen this year. The FMV of
the coins was $1,000 just before they were stolen, and insurance did not cover them. Your
theft loss is $150.
Recovered stolen property. Recovered stolen property is your property that was stolen
and later returned to you. If you recovered property after you had already taken a theft loss deduction, you must refigure your loss using the
smaller of the property's adjusted basis (explained later) or the decrease in FMV from the
time just before it was stolen until the time it was
recovered. Use this amount to refigure your total loss for the year in which the loss was deducted.
If your refigured loss is less than the loss
you deducted, you generally have to report the
difference as income in the recovery year. But
report the difference only up to the amount of
the loss that reduced your tax. For more information on the amount to report, see Recoveries
in Publication 525.

Figuring Decrease in FMV — Items
To Consider
To figure the decrease in FMV because of a
casualty or theft, you generally need a competent appraisal. However, other measures also
can be used to establish certain decreases.
See Appraisal and Cost of cleaning up or making repairs, next.
Appraisal. An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterwards should be made by a
competent appraiser. The appraiser must recognize the effects of any general market decline
that may occur along with the casualty. This information is needed to limit any deduction to the
actual loss resulting from damage to the property.
Several factors are important in evaluating
the accuracy of an appraisal, including the following.
The appraiser's familiarity with your property before and after the casualty or theft.
Publication 547 (2013)

The appraiser's knowledge of sales of
comparable property in the area.
The appraiser's knowledge of conditions in
the area of the casualty.
The appraiser's method of appraisal.
You may be able to use an appraisal
that you used to get a federal loan (or
a federal loan guarantee) as the result
of a federally declared disaster to establish the
amount of your disaster loss. For more information on disasters, see Disaster Area Losses,
later.

TIP

Cost of cleaning up or making repairs. The
cost of repairing damaged property is not part
of a casualty loss. Neither is the cost of cleaning up after a casualty. But you can use the cost
of cleaning up or of making repairs after a casualty as a measure of the decrease in FMV if you
meet all the following conditions.
The repairs are actually made.
The repairs are necessary to bring the
property back to its condition before the
casualty.
The amount spent for repairs is not excessive.
The repairs take care of the damage only.
The value of the property after the repairs
is not, due to the repairs, more than the
value of the property before the casualty.
Landscaping. The cost of restoring landscaping to its original condition after a casualty
may indicate the decrease in FMV. You may be
able to measure your loss by what you spend
on the following.
Removing destroyed or damaged trees
and shrubs, minus any salvage you receive.
Pruning and other measures taken to preserve damaged trees and shrubs.
Replanting necessary to restore the property to its approximate value before the
casualty.
Car value. Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. You can use
the books' retail values and modify them by factors such as the mileage and condition of your
car to figure its value. The prices are not official,
but they may be useful in determining value and
suggesting relative prices for comparison with
current sales and offerings in your area. If your
car is not listed in the books, determine its value
from other sources. A dealer's offer for your car
as a trade-in on a new car is not usually a
measure of its true value.

Figuring Decrease in FMV — Items
Not To Consider
You generally should not consider the following
items when attempting to establish the decrease in FMV of your property.
Cost of protection. The cost of protecting
your property against a casualty or theft is not
part of a casualty or theft loss. The amount you
spend on insurance or to board up your house
against a storm is not part of your loss. If the

property is business property, these expenses
are deductible as business expenses.
If you make permanent improvements to
your property to protect it against a casualty or
theft, add the cost of these improvements to
your basis in the property. An example would
be the cost of a dike to prevent flooding.
Exception. You cannot increase your basis
in the property by, or deduct as a business expense, any expenditures you made with respect
to qualified disaster mitigation payments (discussed later under Disaster Area Losses).
Related expenses. The incidental expenses
due to a casualty or theft, such as expenses for
the treatment of personal injuries, for temporary
housing, or for a rental car, are not part of your
casualty or theft loss. However, they may be
deductible as business expenses if the damaged or stolen property is business property.
Replacement cost. The cost of replacing stolen or destroyed property is not part of a casualty or theft loss.
Example. You bought a new chair 4 years
ago for $300. In April, a fire destroyed the chair.
You estimate that it would cost $500 to replace
it. If you had sold the chair before the fire, you
estimate that you could have received only
$100 for it because it was 4 years old. The chair
was not insured. Your loss is $100, the FMV of
the chair before the fire. It is not $500, the replacement cost.
Sentimental value. Do not consider sentimental value when determining your loss. If a family
portrait, heirloom, or keepsake is damaged, destroyed, or stolen, you must base your loss on
its FMV, as limited by your adjusted basis in the
property.
Decline in market value of property in or
near casualty area. A decrease in the value of
your property because it is in or near an area
that suffered a casualty, or that might again suffer a casualty, is not to be taken into consideration. You have a loss only for actual casualty
damage to your property. However, if your
home is in a federally declared disaster area,
see Disaster Area Losses, later.
Costs of photographs and appraisals. Photographs taken after a casualty will be helpful in
establishing the condition and value of the property after it was damaged. Photographs showing the condition of the property after it was repaired, restored, or replaced may also be
helpful.
Appraisals are used to figure the decrease
in FMV because of a casualty or theft. See Appraisal, earlier, under Figuring Decrease in
FMV — Items To Consider, for information
about appraisals.
The costs of photographs and appraisals
used as evidence of the value and condition of
property damaged as a result of a casualty are
not a part of the loss. They are expenses in determining your tax liability. You can claim these
costs as a miscellaneous itemized deduction
subject to the 2%-of-adjusted-gross-income
limit on Schedule A (Form 1040).

Page 5

Adjusted Basis
The measure of your investment in the property
you own is its basis. For property you buy, your
basis is usually its cost to you. For property you
acquire in some other way, such as inheriting it,
receiving it as a gift, or getting it in a nontaxable
exchange, you must figure your basis in another
way, as explained in Publication 551. If you inherited the property from someone who died in
2010 and the executor of the decedent's estate
made the election to file Form 8939, refer to the
information provided by the executor or see
Publication 4895, Tax Treatment of Property
Acquired From a Decedent Dying in 2010.
Adjustments to basis. While you own the
property, various events may take place that
change your basis. Some events, such as additions or permanent improvements to the property, increase basis. Others, such as earlier
casualty losses and depreciation deductions,
decrease basis. When you add the increases to
the basis and subtract the decreases from the
basis, the result is your adjusted basis. See
Publication 551 for more information on figuring
the basis of your property.

Insurance and
Other Reimbursements
If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. You do not
have a casualty or theft loss to the extent you
are reimbursed.
If you expect to be reimbursed for part or all
of your loss, you must subtract the expected reimbursement when you figure your loss. You
must reduce your loss even if you do not receive payment until a later tax year. See Reimbursement Received After Deducting Loss,
later.
Failure to file a claim for reimbursement. If
your property is covered by insurance, you
must file a timely insurance claim for reimbursement of your loss. Otherwise, you cannot deduct this loss as a casualty or theft.
The portion of the loss usually not covered
by insurance (for example, a deductible) is not
subject to this rule.
Example. You have a car insurance policy
with a $1,000 deductible. Because your insurance did not cover the first $1,000 of an auto
collision, the $1,000 would be deductible (subject to the $100 and 10% rules, discussed
later). This is true, even if you do not file an insurance claim, because your insurance policy
would never have reimbursed you for the deductible.

Types of Reimbursements
The most common type of reimbursement is an
insurance payment for your stolen or damaged
property. Other types of reimbursements are
discussed next. Also see the Instructions for
Form 4684.
Page 6

Employer's emergency disaster fund. If you
receive money from your employer's emergency disaster fund and you must use that
money to rehabilitate or replace property on
which you are claiming a casualty loss deduction, you must take that money into consideration in computing the casualty loss deduction.
Take into consideration only the amount you
used to replace your destroyed or damaged
property.
Example. Your home was extensively damaged by a tornado. Your loss after reimbursement from your insurance company was
$10,000. Your employer set up a disaster relief
fund for its employees. Employees receiving
money from the fund had to use it to rehabilitate
or replace their damaged or destroyed property.
You received $4,000 from the fund and spent
the entire amount on repairs to your home. In
figuring your casualty loss, you must reduce
your unreimbursed loss ($10,000) by the
$4,000 you received from your employer's fund.
Your casualty loss before applying the deduction limits (discussed later) is $6,000.
Cash gifts. If you receive excludable cash gifts
as a disaster victim and there are no limits on
how you can use the money, you do not reduce
your casualty loss by these excludable cash
gifts. This applies even if you use the money to
pay for repairs to property damaged in the disaster.
Example. Your home was damaged by a
hurricane. Relatives and neighbors made cash
gifts to you that were excludable from your income. You used part of the cash gifts to pay for
repairs to your home. There were no limits or
restrictions on how you could use the cash gifts.
It was an excludable gift, so the money you received and used to pay for repairs to your home
does not reduce your casualty loss on the damaged home.
Insurance payments for living expenses.
You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations.
You lose the use of your main home because of a casualty.
Government authorities do not allow you
access to your main home because of a
casualty or threat of one.
Inclusion in income. If these insurance
payments are more than the temporary increase in your living expenses, you must include the excess in your income. Report this
amount on Form 1040, line 21. However, if the
casualty occurs in a federally declared disaster
area, none of the insurance payments are taxable. See Qualified disaster relief payments,
later, under Disaster Area Losses.
A temporary increase in your living expenses is the difference between the actual living
expenses you and your family incurred during
the period you could not use your home and
your normal living expenses for that period. Actual living expenses are the reasonable and
necessary expenses incurred because of the

loss of your main home. Generally, these expenses include the amounts you pay for the following.
Renting suitable housing.
Transportation.
Food.
Utilities.
Miscellaneous services.
Normal living expenses consist of these same
expenses that you would have incurred but did
not because of the casualty or the threat of one.
Example. As a result of a fire, you vacated
your apartment for a month and moved to a motel. You normally pay $525 a month for rent.
None was charged for the month the apartment
was vacated. Your motel rent for this month was
$1,200. You normally pay $200 a month for
food. Your food expenses for the month you
lived in the motel were $400. You received
$1,100 from your insurance company to cover
your living expenses. You determine the payment you must include in income as follows.
1. Insurance payment for living
expenses . . . . . . . . . . . . . . . . . . . . . . $1,100
2. Actual expenses during the
month you are unable to
use your home because of
the fire . . . . . . . . . . . . . . . . . . $1,600
3. Normal living expenses . . .
725
4. Temporary increase in
living expenses: Subtract line 3
from line 2 . . . . . . . . . . . . . . . . . . . . . . 875
5. Amount of payment includible in
income: Subtract line 4 from
line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 225
Tax year of inclusion. You include the taxable part of the insurance payment in income
for the year you regain the use of your main
home or, if later, for the year you receive the
taxable part of the insurance payment.
Example. Your main home was destroyed
by a tornado in August 2011. You regained use
of your home in November 2012. The insurance
payments you received in 2011 and 2012 were
$1,500 more than the temporary increase in
your living expenses during those years. You include this amount in income on your 2012 Form
1040. If, in 2013, you receive further payments
to cover the living expenses you had in 2011
and 2012, you must include those payments in
income on your 2013 Form 1040.
Disaster relief. 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.
Qualified disaster relief payments you
receive for expenses you incurred as a
result of a federally declared disaster,
are not taxable income to you. For more information, see Qualified disaster relief payments
under Disaster Area Losses, later.

TIP

Disaster unemployment assistance payments are unemployment benefits that are taxable.
Publication 547 (2013)

Table 2. Deduction Limit Rules for Personal-Use and Employee Property
$100 Rule

10% Rule

2% Rule

General Application

You must reduce each casualty or
theft loss by $100 when figuring
your deduction. Apply this rule to
personal-use property after you
have figured the amount of your
loss.

You must reduce your total
casualty or theft loss by 10% of
your adjusted gross income.
Apply this rule to personal-use
property after you reduce each
loss by $100 (the $100 rule).

You must reduce your total
casualty or theft loss by 2% of
your adjusted gross income.
Apply this rule to property you
used in performing services as
an employee after you have
figured the amount of your loss
and added it to your job
expenses and most other
miscellaneous itemized
deductions.

Single Event

Apply this rule only once, even if
many pieces of property are
affected.

Apply this rule only once, even if
many pieces of property are
affected.

Apply this rule only once, even if
many pieces of property are
affected.

More Than One Event

Apply to the loss from each event.

Apply to the total of all your
losses from all events.

Apply to the total of all your
losses from all events.

More Than One Person—
With Loss From the
Same Event
(other than a married couple
filing jointly)

Apply separately to each person.

Apply separately to each person.

Apply separately to each person.

Filing
Joint
Return

Apply as if you were one person.

Apply as if you were one person.

Apply as if you were one person.

Filing
Separate
Return

Apply separately to each spouse.

Apply separately to each spouse.

Apply separately to each
spouse.

Apply separately to each owner of
jointly owned property.

Apply separately to each owner
of jointly owned property.

Apply separately to each owner
of jointly owned property.

Married Couple—
With Loss From the
Same Event

More Than One Owner
(other than a married
couple filing jointly)

Generally, disaster relief grants received under the Robert T. Stafford Disaster Relief and
Emergency Assistance Act are not included in
your income. See Federal disaster relief grants,
later, under Disaster Area Losses.
Loan proceeds. Do not reduce your casualty
loss by loan proceeds you use to rehabilitate or
replace property on which you are claiming a
casualty loss deduction. If you have a federal
loan that is canceled (forgiven), see Federal
loan canceled, later, under Disaster Area Losses.

Reimbursement Received After
Deducting Loss
If you figured your casualty or theft loss using
the amount of your expected reimbursement,
you may have to adjust your tax return for the
tax year in which you get your actual reimbursement. This section explains the adjustment you
may have to make.
Actual reimbursement less than expected.
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.
Example. Your personal car had a FMV of
$2,000 when it was destroyed in a collision with
another car in 2012. The accident was due to
the negligence of the other driver. At the end of
Publication 547 (2013)

2012, there was a reasonable prospect that the
owner of the other car would reimburse you in
full. You did not have a deductible loss in 2012.
In January 2013, the court awards you a
judgment of $2,000. However, in July it becomes apparent that you will be unable to collect any amount from the other driver. Since this
is your only casualty or theft loss, you can deduct the loss in 2013 that is figured by applying
the Deduction Limits (discussed later).
Actual reimbursement more than expected.
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. However, if any part of the original deduction did not reduce your tax for the
earlier year, do not include that part of the reimbursement in your income. You do not refigure
your tax for the year you claimed the deduction.
See Recoveries in Publication 525 to find out
how much extra reimbursement to include in income.
Example. In 2012, a hurricane destroyed
your motorboat. Your loss was $3,000, and you
estimated that your insurance would cover
$2,500 of it. You did not itemize deductions on
your 2012 return, so you could not deduct the
loss. When the insurance company reimburses
you for the loss, you do not report any of the reimbursement as income. This is true even if it is
for the full $3,000 because you did not deduct

the loss on your 2012 return. The loss did not
reduce your tax.
If the total of all the reimbursements
you receive is more than your adjusted
CAUTION
basis in the destroyed or stolen property, you will have a gain on the casualty or
theft. If you have already taken a deduction for
a loss and you receive the reimbursement in a
later year, you may have to include the gain in
your income for the later year. Include the gain
as ordinary income up to the amount of your deduction that reduced your tax for the earlier
year. You may be able to postpone reporting
any remaining gain as explained under Postponement of Gain, later.

!

Actual reimbursement same as expected. 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.
Example. In December 2013, you had a
collision while driving your personal car. Repairs to the car cost $950. You had $100 deductible collision insurance. Your insurance
company agreed to reimburse you for the rest
of the damage. Because you expected a reimbursement from the insurance company, you
did not have a casualty loss deduction in 2013.
Due to the $100 rule, you cannot deduct the
$100 you paid as the deductible. When you receive the $850 from the insurance company in
2014, do not report it as income.
Page 7

Deduction Limits
After you have figured your casualty or theft
loss, you must figure how much of the loss you
can deduct.
The deduction for casualty and theft losses
of employee property and personal-use property is limited. A loss on employee property is
subject to the 2% rule, discussed next. With
certain exceptions, a loss on property you own
for your personal use is subject to the $100 and
10% rules, discussed later. The 2%, $100, and
10% rules are also summarized in Table 2.
Losses on business property (other than
employee property) and income-producing
property are not subject to these rules. However, if your casualty or theft loss involved a
home you used for business or rented out, your
deductible loss may be limited. See the Instructions for Form 4684, Section B. If the casualty
or theft loss involved property used in a passive
activity, see Form 8582, Passive Activity Loss
Limitations, and its instructions.

2% Rule
The casualty and theft loss deduction for employee property, when added to your job expenses and most other miscellaneous itemized deductions on Schedule A (Form 1040) or Form
1040NR, Schedule A, must be reduced by 2%
of your adjusted gross income. Employee property is property used in performing services as
an employee.

$100 Rule
After you have figured your casualty or theft
loss on personal-use property, as discussed
earlier, you must reduce that loss by $100. This
reduction applies to each total casualty or theft
loss. It does not matter how many pieces of
property are involved in an event. Only a single
$100 reduction applies.
Example. You have $750 deductible collision insurance on your car. The car is damaged
in a collision. The insurance company pays you
for the damage minus the $750 deductible. The
amount of the casualty loss is based solely on
the deductible. The casualty loss is $650 ($750
− $100) because the first $100 of a casualty
loss on personal-use property is not deductible.
Single event. Generally, events closely related in origin cause a single casualty. It is a single casualty when the damage is from two or
more closely related causes, such as wind and
flood damage caused by the same storm. A single casualty may also damage two or more
pieces of property, such as a hailstorm that
damages both your home and your car parked
in your driveway.
Example 1. A thunderstorm destroyed your
pleasure boat. You also lost some boating
equipment in the storm. Your loss was $5,000
on the boat and $1,200 on the equipment. Your
insurance company reimbursed you $4,500 for
the damage to your boat. You had no insurance
Page 8

coverage on the equipment. Your casualty loss
is from a single event and the $100 rule applies
once. Figure your loss before applying the 10%
rule (discussed later) as follows.
Boat Equipment
1. Loss . . . . . . . . . . . . .
2. Subtract
insurance . . . . . . . . .
3. Loss after
reimbursement . . . .

$5,000

$1,200

4,500

-0-

$ 500

$1,200

4. Total loss . . . . . . . . . . . . . . . . .
5. Subtract $100 . . . . . . . . . . . . .
6. Loss before 10% rule . . . . .

$1,700
100
$1,600

Example 2. Thieves broke into your home
in January and stole a ring and a fur coat. You
had a loss of $200 on the ring and $700 on the
coat. This is a single theft. The $100 rule applies to the total $900 loss.
Example 3. In September, hurricane winds
blew the roof off your home. Flood waters
caused by the hurricane further damaged your
home and destroyed your furniture and personal car. This is considered a single casualty.
The $100 rule is applied to your total loss from
the flood waters and the wind.
More than one loss. If you have more than
one casualty or theft loss during your tax year,
you must reduce each loss by $100.
Example. Your family car was damaged in
an accident in January. Your loss after the insurance reimbursement was $75. In February,
your car was damaged in another accident.
This time your loss after the insurance reimbursement was $90. Apply the $100 rule to
each separate casualty loss. Since neither accident resulted in a loss of over $100, you are not
entitled to any deduction for these accidents.
More than one person. If two or more individuals (other than a husband and wife filing a joint
return) have losses from the same casualty or
theft, the $100 rule applies separately to each
individual.
Example. A fire damaged your house and
also damaged the personal property of your
house guest. You must reduce your loss by
$100. Your house guest must reduce his or her
loss by $100.
Married taxpayers. If you and your spouse
file a joint return, you are treated as one individual in applying the $100 rule. It does not matter
whether you own the property jointly or separately.
If you and your spouse have a casualty or
theft loss and you file separate returns, each of
you must reduce your loss by $100. This is true
even if you own the property jointly. If one
spouse owns the property, only that spouse can
figure a loss deduction on a separate return.
If the casualty or theft loss is on property you
own as tenants by the entirety, each of you can
figure your deduction on only one-half of the

loss on separate returns. Neither of you can figure your deduction on the entire loss on a separate return. Each of you must reduce the loss by
$100.
More than one owner. If two or more individuals (other than a husband and wife filing a joint
return) have a loss on property jointly owned,
the $100 rule applies separately to each. For
example, if two sisters live together in a home
they own jointly and they have a casualty loss
on the home, the $100 rule applies separately
to each sister.

10% Rule
You must reduce the total of all your casualty or
theft losses on personal-use property by 10% of
your adjusted gross income. Apply this rule after you reduce each loss by $100. For more information, see the Form 4684 instructions. If
you have both gains and losses from casualties
or thefts, see Gains and losses, later in this discussion.
Example. In June, you discovered that your
house had been burglarized. Your loss after insurance reimbursement was $2,000. Your adjusted gross income for the year you discovered
the theft is $29,500. Figure your theft loss as
follows.
1.
2.
3.
4.

Loss after insurance . . . . . . . . . .
Subtract $100 . . . . . . . . . . . . . . . .
Loss after $100 rule . . . . . . . . . . .
Subtract 10% of $29,500
AGI . . . . . . . . . . . . . . . . . . . . . . . . .
5. Theft loss deduction . . . . . .

$2,000
100
$1,900
$2,950
$ -0-

You do not have a theft loss deduction because your loss ($1,900) is less than 10% of
your adjusted gross income ($2,950).
More than one loss. If you have more than
one casualty or theft loss during your tax year,
reduce each loss by any reimbursement and by
$100. Then you must reduce the total of all your
losses by 10% of your adjusted gross income.
Example. In March, you had a car accident
that totally destroyed your car. You did not have
collision insurance on your car, so you did not
receive any insurance reimbursement. Your
loss on the car was $1,800. In November, a fire
damaged your basement and totally destroyed
the furniture, washer, dryer, and other items you
had stored there. Your loss on the basement
items after reimbursement was $2,100. Your
adjusted gross income for the year that the accident and fire occurred is $25,000. You figure
your casualty loss deduction as follows.

Publication 547 (2013)

Car
1. Loss . . . . . . . . . . . . . .
2. Subtract $100 per
incident . . . . . . . . . . .
3. Loss after $100
rule . . . . . . . . . . . . . . .

Basement

$1,800

$2,100

100

100

$1,700

$2,000

4. Total loss . . . . . . . . . . . . . . . . . .
5. Subtract 10% of $25,000
AGI . . . . . . . . . . . . . . . . . . . . . . .
6. Casualty loss deduction . . .

$3,700
2,500
$1,200

Married taxpayers. If you and your spouse file
a joint return, you are treated as one individual
in applying the 10% rule. It does not matter if
you own the property jointly or separately.
If you file separate returns, the 10% rule applies to each return on which a loss is claimed.
More than one owner. If two or more individuals (other than husband and wife filing a joint return) have a loss on property that is owned
jointly, the 10% rule applies separately to each.
Gains and losses. If you have casualty or
theft gains as well as losses to personal-use
property, you must compare your total gains to
your total losses. Do this after you have reduced each loss by any reimbursements and by
$100 but before you have reduced the losses
by 10% of your adjusted gross income.

!

CAUTION

Casualty or theft gains do not include
gains you choose to postpone. See
Postponement of Gain, later.

Losses more than gains. If your losses
are more than your recognized gains, subtract
your gains from your losses and reduce the result by 10% of your adjusted gross income. The
rest, if any, is your deductible loss from personal-use property.
Example. Your theft loss after reducing it
by reimbursements and by $100 is $2,700. Your
casualty gain is $700. Your loss is more than
your gain, so you must reduce your $2,000 net
loss ($2,700 − $700) by 10% of your adjusted
gross income.
Gains more than losses. If your recognized gains are more than your losses, subtract
your losses from your gains. The difference is
treated as a capital gain and must be reported
on Schedule D (Form 1040). The 10% rule does
not apply to your gains.
Example. Your theft loss is $600 after reducing it by reimbursements and by $100. Your
casualty gain is $1,600. Because your gain is
more than your loss, you must report the $1,000
net gain ($1,600 − $600) on Schedule D (Form
1040).
More information. For information on how
to figure recognized gains, see Figuring a Gain,
later.

Figuring the Deduction
Generally, you must figure your loss separately
for each item stolen, damaged, or destroyed.
Publication 547 (2013)

However, a special rule applies to real property
you own for personal use.
Real property. In figuring a loss to real estate
you own for personal use, all improvements
(such as buildings and ornamental trees and
the land containing the improvements) are considered together.
Example 1. In June, a fire destroyed your
lakeside cottage, which cost $144,800 (including $14,500 for the land) several years ago.
(Your land was not damaged.) This was your
only casualty or theft loss for the year. The FMV
of the property immediately before the fire was
$180,000 ($145,000 for the cottage and
$35,000 for the land). The FMV immediately after the fire was $35,000 (value of the land). You
collected $130,000 from the insurance company. Your adjusted gross income for the year
the fire occurred is $80,000. Your deduction for
the casualty loss is $6,700, figured in the following manner.
1. Adjusted basis of the entire
property (cost in this
example) . . . . . . . . . . . . . . . . . . $144,800
2. FMV of entire property
before fire . . . . . . . . . . . . . . . . . $180,000
3. FMV of entire property after
35,000
fire . . . . . . . . . . . . . . . . . . . . . . .
4. Decrease in FMV of entire
property (line 2 − line 3) . . . . . $145,000
5. Loss (smaller of line 1 or
line 4) . . . . . . . . . . . . . . . . . . . . $144,800
6. Subtract insurance . . . . . . . . .
130,000
7. Loss after reimbursement . . .
$14,800
8. Subtract $100 . . . . . . . . . . . . .
100
9. Loss after $100 rule . . . . . . . .
$14,700
10. Subtract 10% of $80,000
8,000
AGI . . . . . . . . . . . . . . . . . . . . . .
11. Casualty loss deduction . . .
$ 6,700
Example 2. You bought your home a few
years ago. You paid $150,000 ($10,000 for the
land and $140,000 for the house). You also
spent an additional $2,000 for landscaping.
This year a fire destroyed your home. The fire
also damaged the shrubbery and trees in your
yard. The fire was your only casualty or theft
loss this year. Competent appraisers valued the
property as a whole at $175,000 before the fire,
but only $50,000 after the fire. Shortly after the
fire, the insurance company paid you $95,000
for the loss. Your adjusted gross income for this
year is $70,000. You figure your casualty loss
deduction as follows.

1. Adjusted basis of the entire
property (cost of land,
building, and landscaping) . . . $152,000
2. FMV of entire property
before fire . . . . . . . . . . . . . . . . . $175,000
3. FMV of entire property after
50,000
fire . . . . . . . . . . . . . . . . . . . . . . .
4. Decrease in FMV of entire
$125,000
property (line 2 − line 3)
5. Loss (smaller of line 1 or
line 4) . . . . . . . . . . . . . . . . . . . . $125,000
6. Subtract insurance . . . . . . . . .
95,000
7. Loss after reimbursement . . .
$30,000
8. Subtract $100 . . . . . . . . . . . . .
100
9. Loss after $100 rule . . . . . . . .
$29,900
10. Subtract 10% of $70,000
7,000
AGI . . . . . . . . . . . . . . . . . . . . . .
11. Casualty loss deduction . . . $ 22,900
Personal property. Personal property is any
property that is not real property. If your personal property is stolen or is damaged or destroyed by a casualty, you must figure your loss
separately for each item of property. Then combine these separate losses to figure the total
loss. Reduce the total loss by $100 and 10% of
your adjusted gross income to figure the loss
deduction.
Example 1. In August, a storm destroyed
your pleasure boat, which cost $18,500. This
was your only casualty or theft loss for the year.
Its FMV immediately before the storm was
$17,000. You had no insurance, but were able
to salvage the motor of the boat and sell it for
$200. Your adjusted gross income for the year
the casualty occurred is $70,000.
Although the motor was sold separately, it is
part of the boat and not a separate item of property. You figure your casualty loss deduction as
follows.
1. Adjusted basis (cost in this
example) . . . . . . . . . . . . . . . . . .

$18,500

2. FMV before storm . . . . . . . . . .
3. FMV after storm . . . . . . . . . . . .

$17,000
200

4. Decrease in FMV
(line 2 − line 3) . . . . . . . . . . . . .

$16,800

5. Loss (smaller of line 1 or
line 4) . . . . . . . . . . . . . . . . . . . . .
6. Subtract insurance . . . . . . . . . .
7. Loss after reimbursement . . . .
8. Subtract $100 . . . . . . . . . . . . . .
9. Loss after $100 rule . . . . . . . . .
10. Subtract 10% of $70,000
AGI . . . . . . . . . . . . . . . . . . . . . . .
11. Casualty loss deduction . . .

$16,800
-0$16,800
100
$16,700
7,000
$ 9,700

Example 2. In June, you were involved in
an auto accident that totally destroyed your personal car and your antique pocket watch. You
had bought the car for $30,000. The FMV of the
car just before the accident was $17,500. Its
FMV just after the accident was $180 (scrap
value). Your insurance company reimbursed
you $16,000.

Page 9

Your watch was not insured. You had purchased it for $250. Its FMV just before the accident was $500. Your adjusted gross income for
the year the accident occurred is $97,000. Your
casualty loss deduction is zero, figured as follows.
Car
1. Adjusted basis
(cost) . . . . . . . . . . . . . . . . $30,000
2. FMV before
accident . . . . . . . . . . . . . $17,500
3. FMV after accident . . . .
180
4. Decrease in FMV
(line 2 − line 3) . . . . . . . . $17,320
5. Loss (smaller of line 1
or line 4) . . . . . . . . . . . . . $17,320
6. Subtract insurance . . . . 16,000
7. Loss after
reimbursement . . . . . . . $1,320
8.
9.
10.
11.
12.

Watch
$250
$500
-0$500
$250
-0$250

Total loss . . . . . . . . . . . . . . . . . . . . $1,570
Subtract $100 . . . . . . . . . . . . . . . .
100
Loss after $100 rule . . . . . . . . . . . $1,470
Subtract 10% of $97,000 AGI . . . 9,700
Casualty loss deduction . . . . .
$ -0-

Both real and personal properties. When a
casualty involves both real and personal properties, you must figure the loss separately for
each type of property. However, you apply a
single $100 reduction to the total loss. Then,
you apply the 10% rule to figure the casualty
loss deduction.
Example. In July, a hurricane damaged
your home, which cost you $164,000 including
land. The FMV of the property (both building
and land) immediately before the storm was
$170,000 and its FMV immediately after the
storm was $100,000. Your household furnishings were also damaged. You separately figured the loss on each damaged household item
and arrived at a total loss of $600.
You collected $50,000 from the insurance
company for the damage to your home, but
your household furnishings were not insured.
Your adjusted gross income for the year the
hurricane occurred is $65,000. You figure your
casualty loss deduction from the hurricane in
the following manner.

Page 10

1. Adjusted basis of real
property (cost in this
example) . . . . . . . . . . . . . . . . .
2. FMV of real property before
hurricane . . . . . . . . . . . . . . . . .
3. FMV of real property after
hurricane . . . . . . . . . . . . . . . . .
4. Decrease in FMV of real
property (line 2 − line 3) . . . .
5. Loss on real property
(smaller of line 1 or
line 4) . . . . . . . . . . . . . . . . . . . .
6. Subtract insurance . . . . . . . .
7. Loss on real property after
reimbursement . . . . . . . . . . . .
8. Loss on furnishings . . . . . . . .
9. Subtract insurance . . . . . . . .
10. Loss on furnishings after
reimbursement . . . . . . . . . . . .
11. Total loss (line 7 plus
line 10) . . . . . . . . . . . . . . . . . . .
12. Subtract $100 . . . . . . . . . . . . .
13. Loss after $100 rule . . . . . . .
14. Subtract 10% of $65,000
AGI . . . . . . . . . . . . . . . . . . . . . .
15. Casualty loss deduction . .

$164,000
$170,000
100,000
$70,000

$70,000
50,000
$20,000
$600
-0$600
$20,600
100
$20,500
6,500
$14,000

Property used partly for business and
partly for personal purposes. When property
is used partly for personal purposes and partly
for business or income-producing purposes, the
casualty or theft loss deduction must be figured
separately for the personal-use portion and for
the business or income-producing portion. You
must figure each loss separately because the
losses attributed to these two uses are figured
in two different ways. When figuring each loss,
allocate the total cost or basis, the FMV before
and after the casualty or theft loss, and the insurance or other reimbursement between the
business and personal use of the property. The
$100 rule and the 10% rule apply only to the
casualty or theft loss on the personal-use portion of the property.
Example. You own a building that you constructed on leased land. You use half of the
building for your business and you live in the
other half. The cost of the building was
$400,000. You made no further improvements
or additions to it.
A flood in March damaged the entire building. The FMV of the building was $380,000 immediately before the flood and $320,000 afterwards. Your insurance company reimbursed
you $40,000 for the flood damage. Depreciation
on the business part of the building before the
flood totaled $24,000. Your adjusted gross income for the year the flood occurred is
$125,000.
You have a deductible business casualty
loss of $10,000. You do not have a deductible
personal casualty loss because of the 10% rule.
You figure your loss as follows.

Business
Part
1. Cost (total
$400,000) . . . . . . .
2. Subtract
depreciation . . . . .
3. Adjusted basis . . .
4. FMV before flood
(total
$380,000) . . . . . . .
5. FMV after flood
(total
$320,000) . . . . . . .
6. Decrease in FMV
(line 4 − line 5) . . .
7. Loss (smaller of
line 3 or line 6) . . .
8. Subtract
insurance . . . . . . .
9. Loss after
reimbursement . . .
10. Subtract $100 on
personal-use
property . . . . . . . .
11. Loss after $100
rule . . . . . . . . . . . .
12. Subtract 10% of
$125,000 AGI on
personal-use
property . . . . . . . .
13. Deductible
business loss . .
14. Deductible
personal loss . . .

$200,000

Personal
Part
$200,000

24,000

-0-

$176,000

$200,000

$190,000

$190,000

160,000

160,000

$30,000

$30,000

$30,000

$30,000

20,000

20,000

$10,000

$10,000

-0-

100

$10,000

$9,900

-0-

12,500

$10,000
. . . . . . . .

$   -0-

Figuring a Gain
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. Your gain is figured as follows.
The amount you receive (discussed next),
minus
Your adjusted basis in the property at the
time of the casualty or theft. See Adjusted
Basis, earlier, for information on adjusted
basis.
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.
Amount you receive. The amount you receive
includes any money plus the value of any property you receive minus any expenses you have
in obtaining reimbursement. It also includes any
reimbursement used to pay off a mortgage or
other lien on the damaged, destroyed, or stolen
property.
Example. A hurricane destroyed your personal residence and the insurance company
awarded you $145,000. You received $140,000
in cash. The remaining $5,000 was paid directly
to the holder of a mortgage on the property. The
amount you received includes the $5,000 reimbursement paid on the mortgage.
Publication 547 (2013)

Main home destroyed. If you have a gain because your main home was destroyed, you
generally can exclude the gain from your income as if you had sold or exchanged your
home. You may be able to exclude up to
$250,000 of the gain (up to $500,000 if married
filing jointly). To exclude a gain, you generally
must have owned and lived in the property as
your main home for at least 2 years during the
5-year period ending on the date it was destroyed. For information on this exclusion, see
Publication 523. 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. See Postponement of
Gain, later.
Reporting a gain. You generally must report
your gain as income in the year you receive the
reimbursement. However, you do not have to
report your gain if you meet certain requirements and choose to postpone reporting the
gain according to the rules explained under
Postponement of Gain, next.
For information on how to report a gain, see
How To Report Gains and Losses, later.
If you have a casualty or theft gain on
personal-use property that you choose
CAUTION
to postpone reporting (as explained
next) and you also have another casualty or
theft loss on personal-use property, do not consider the gain you are postponing when figuring
your casualty or theft loss deduction. See 10%
Rule under Deduction Limits, earlier.

!

Postponement of 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 or stolen property. Your basis in the new property is generally
the same as your adjusted basis in the property
it replaces.
You must ordinarily report the gain on your
stolen or destroyed property if you receive
money or unlike property as reimbursement.
However, you can choose to postpone reporting the gain if you purchase property that is similar or related in service or use to the stolen or
destroyed property within a specified replacement period, discussed later. You also can
choose to postpone reporting the gain if you
purchase a controlling interest (at least 80%) in
a corporation owning property that is similar or
related in service or use to the property. See
Controlling interest in a corporation, later.
If you have a gain on damaged property,
you can postpone reporting the gain if you
spend the reimbursement to restore the property.
To postpone reporting all the gain, the cost
of your replacement property must be at least
as much as the reimbursement you receive. 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.
Example. In 1970, you bought an oceanfront cottage for your personal use at a cost of
$18,000. You made no further improvements or
Publication 547 (2013)

additions to it. When a storm destroyed the cottage this January, the cottage was worth
$250,000. You received $146,000 from the insurance company in March. You had a gain of
$128,000 ($146,000 − $18,000).
You spent $144,000 to rebuild the cottage.
Since this is less than the insurance proceeds
received, you must include $2,000 ($146,000 −
$144,000) in your income.
Buying replacement property from a related
person. You cannot postpone reporting a gain
from a casualty or theft if you buy the replacement property from a related person (discussed
later). This rule applies to the following taxpayers.
1. C corporations.
2. Partnerships in which more than 50% of
the capital or profits interests is owned by
C corporations.
3. All others (including individuals, partnerships — other than those in (2) — and S
corporations) if the total realized gain for
the tax year on all destroyed or stolen
properties on which there are realized
gains is more than $100,000.
For casualties and thefts described in (3)
above, gains cannot be offset by any losses
when determining whether the total gain is more
than $100,000. If the property is owned by a
partnership, the $100,000 limit applies to the
partnership and each partner. If the property is
owned by an S corporation, the $100,000 limit
applies to the S corporation and each shareholder.
Exception. 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 destroyed or stolen
property.
Related persons. 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. For more information on related persons, see Nondeductible
Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544.
Death of a taxpayer. 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. The executor of the estate or the person succeeding to
the funds from the casualty or theft cannot postpone reporting the gain by buying replacement
property.

Replacement Property
You must buy replacement property for the specific purpose of replacing your destroyed or stolen property. Property you acquire as a gift or
inheritance does not qualify.
You do not have to use the same funds you
receive as reimbursement for your old property
to acquire the replacement property. If you

spend the money you receive from the insurance company for other purposes, and borrow
money to buy replacement property, you can
still postpone reporting the gain if you meet the
other requirements.
Advance payment. If you pay a contractor in
advance to replace your destroyed or stolen
property, you are not considered to have
bought replacement property unless it is finished before the end of the replacement period.
See Replacement Period, later.
Similar or related in service or use. Replacement property must be similar or related in
service or use to the property it replaces.
Timber loss. Standing timber you bought
with the proceeds from the sale of timber
downed by a casualty (such as high winds,
earthquakes, or volcanic eruptions) qualifies as
replacement property. If you bought the standing timber within the specified replacement period, you can postpone reporting the gain.
Owner-user. 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.
Example. Your home was destroyed by fire
and you invested the insurance proceeds in a
grocery store. Your replacement property is not
similar or related in service or use to the destroyed property. To be similar or related in
service or use, your replacement property must
also be used by you as your home.
Main home in disaster area. Special rules
apply to replacement property related to the
damage or destruction of your main home (or its
contents) if located in a federally declared disaster area. For more information, see Gains Realized on Homes in Disaster Areas in the Instructions for Form 4684.
Owner-investor. If you are an owner-investor, “similar or related in service or use”
means that any replacement property must
have a similar relationship of services or uses to
you as the property it replaces. You decide this
by determining all the following.
Whether the properties are of similar service to you.
The nature of the business risks connected
with the properties.
What the properties demand of you in the
way of management, service, and relations
to your tenants.
Example. You owned land and a building
you rented to a manufacturing company. The
building was destroyed by fire. During the replacement period, you had a new building constructed. You rented out the new building for
use as a wholesale grocery warehouse. Because the replacement property is also rental
property, the two properties are considered
similar or related in service or use if there is a
similarity in all of the following areas.
Your management activities.
The amount and kind of services you provide to your tenants.
The nature of your business risks connected with the properties.
Page 11

Business or income-producing property
located in a federally declared disaster
area. 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. For more
information, see Disaster Area Losses, later.
Controlling interest in a corporation. You
can replace property by acquiring a controlling
interest in a corporation that owns property similar or related in service or use to your damaged, destroyed, or stolen property. You can
postpone reporting your entire gain if the cost of
the stock that gives you a controlling interest is
at least as much as the amount received (reimbursement) for your property. You have a controlling interest if you own stock having at least
80% of the combined voting power of all
classes of voting stock and at least 80% of the
total number of shares of all other classes of
stock.
Basis adjustment to corporation's property. The basis of property held by the corporation at the time you acquired control must be reduced by the amount of your postponed gain, if
any. You are not required to reduce the adjusted basis of the corporation's properties below
your adjusted basis in the corporation's stock
(determined after reduction by the amount of
your postponed gain).
Allocate this reduction to the following
classes of property in the order shown below.
1. Property that is similar or related in service
or use to the destroyed or stolen property.
2. Depreciable property not reduced in (1).
3. All other property.
If two or more properties fall in the same class,
allocate the reduction to each property in proportion to the adjusted bases of all the properties in that class. The reduced basis of any single property cannot be less than zero.
Main home replaced. If your gain from the reimbursement you receive because of the destruction of your main home is more than the
amount you can exclude from your income (see
Main home destroyed under Figuring a Gain,
earlier), you can postpone reporting the excess
gain by buying replacement property that is
similar or related in service or use. To postpone
reporting all the excess gain, the replacement
property must cost at least as much as the
amount you received because of the destruction minus the excluded gain.
Also, if you postpone reporting any part of
your gain under these rules, you are treated as
having owned and used the replacement property as your main home for the period you
owned and used the destroyed property as your
main home.
Basis of replacement property. You must reduce the basis of your replacement property (its
cost) by the amount of postponed gain. In this
way, tax on the gain is postponed until you dispose of the replacement property.

Page 12

Example. A fire destroyed your rental
home that you never lived in. The insurance
company reimbursed you $67,000 for the property, which had an adjusted basis of $62,000.
You had a gain of $5,000 from the casualty. If
you have another rental home constructed for
$110,000 within the replacement period, you
can postpone reporting the gain. You will have
reinvested all the reimbursement (including
your entire gain) in the new rental home. Your
basis for the new rental home will be $105,000
($110,000 cost − $5,000 postponed gain).

Replacement Period
To postpone reporting your gain, you must buy
replacement property within a specified period
of time. This is the replacement period.
The replacement period begins on the date
your property was damaged, destroyed, or stolen.
The replacement period ends 2 years after
the close of the first tax year in which any part of
your gain is realized.
Example. You are a calendar year taxpayer. While you were on vacation, a valuable
piece of antique furniture that cost $2,200 was
stolen from your home. You discovered the
theft when you returned home on July 7, 2013.
Your insurance company investigated the theft
and did not settle your claim until January 22,
2014, when they paid you $3,000. You first realized a gain from the reimbursement for the theft
during 2014, so you have until December 31,
2016, to replace the property.
Main home in disaster area. For your main
home (or its contents) located in a federally declared disaster area, the replacement period
generally ends 4 years after the close of the first
tax year in which any part of your gain is realized. See Disaster Area Losses, later.
Example. You are a calendar year taxpayer. A hurricane destroyed your home in September 2013. In December 2013, the insurance
company paid you $3,000 more than the adjusted basis of your home. The area in which your
home is located is not a federally declared disaster area. You first realized a gain from the reimbursement for the casualty in 2013, so you
have until December 31, 2015, to replace the
property. If your home had been in a federally
declared disaster area, you would have until
December 31, 2017, to replace the property.
Property in a Midwestern disaster area. For
property located in a Midwestern disaster area
(defined in Table 4 in the 2008 Publication 547)
that was destroyed, damaged, or stolen as a result of severe storms, tornadoes, or flooding,
the replacement period ends 5 years after the
close of the first tax year in which any part of
your gain is realized. This 5-year replacement
period applies only if substantially all of the use
of the replacement property is in a Midwestern
disaster area.

May 3, 2007, as a result of 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. This 5-year replacement
period applies only if substantially all of the use
of the replacement property is in the Kansas
disaster area.
Property in the Hurricane Katrina disaster
area. For property located in the Hurricane Katrina disaster area that was destroyed, damaged, or stolen 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. This 5-year replacement period applies
only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area.
Extension. You can apply for an extension of
the replacement period. Send your written application to the Internal Revenue Service Center
where you file your tax return. See your tax return instructions for the address. Your application must contain all the details about the need
for the extension. You should make the application before the end of the replacement period.
However, you can file an application within a
reasonable time after the replacement period
ends if you have a good reason for the delay.
An extension may be granted if you can show
that there is reasonable cause for not making
the replacement within the regular period.
Ordinarily, requests for extensions are not
made or granted until near the end of the replacement period or the extended replacement
period. Extensions are usually limited to a period of not more than 1 year. The high market
value or scarcity of replacement property is not
sufficient grounds for granting an extension. If
your replacement property is being constructed
and you clearly show that the construction cannot be completed within the replacement period, you may be granted an extension of the
period.

How To Postpone a Gain
You postpone reporting your gain from a casualty or theft by reporting your choice on your tax
return for the year you have the gain. You have
the gain in the year you receive insurance proceeds or other reimbursements that result in a
gain.
If a partnership or a corporation owns the
stolen or destroyed property, only the partnership or corporation can choose to postpone reporting the gain.
Required statement. You should attach a
statement to your return for the year you have
the gain. This statement should include the following.
The date and details of the casualty or
theft.
The insurance or other reimbursement you
received from the casualty or theft.
How you figured the gain.

Property in the Kansas disaster area. For
property located in the Kansas disaster area
that was destroyed, damaged, or stolen after
Publication 547 (2013)

Replacement property acquired before
return filed. 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 of the following.
The replacement property.
The postponed gain.
The basis adjustment that reflects the
postponed gain.
Any gain you are reporting as income.
Replacement property acquired after return filed. If you intend to acquire replacement
property after you file your return for the year in
which you have the gain, your statement should
also state that you are choosing to replace the
property within the required replacement period.
You should then attach another statement to
your return for the year in which you acquire the
replacement property. This statement should
contain detailed information on the replacement
property.
If you acquire part of your replacement property in one year and part in another year, you
must make a statement for each year. The
statement should contain detailed information
on the replacement property bought in that
year.
Substituting replacement property. Once
you have acquired qualified replacement property that you designate as replacement property
in a statement attached to your tax return, you
cannot later substitute other qualified replacement property. This is true even if you acquire
the other property within the replacement period. 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.
Amended return. You must file an amended
return (individuals use Form 1040X) for the tax
year of the gain in either of the following situations.
You do not acquire replacement property
within the required replacement period
plus extensions. On this amended return,
you must report the gain and pay any additional tax due.
You acquire replacement property within
the required replacement period plus extensions, but at a cost less than the
amount you receive for the casualty or
theft. On this amended return, you must report the portion of the gain that cannot be
postponed and pay any additional tax due.
Three-year limit. The period for assessing tax
on any gain ends 3 years after the date you notify the director of the Internal Revenue Service
for your area of any of the following.
You replaced the property.
You do not intend to replace the property.
You did not replace the property within the
replacement period.
Changing your mind. You can change your
mind about whether to report or to postpone rePublication 547 (2013)

porting your gain at any time before the end of
the replacement period.
Example. Your property was stolen in
2012. Your insurance company reimbursed you
$10,000, of which $5,000 was a gain. You reported the $5,000 gain on your return for 2012
(the year you realized the gain) and paid the tax
due. In 2013 you bought replacement property.
Your replacement property cost $9,000. Since
you reinvested all but $1,000 of your reimbursement, you can now postpone reporting $4,000
($5,000 − $1,000) of your gain.
To postpone reporting your gain, file an
amended return for 2012 using Form 1040X.
You should attach an explanation showing that
you previously reported the entire gain from the
theft but you now want to report only the part of
the gain ($1,000) equal to the part of the reimbursement not spent for replacement property.

When To Report
Gains and Losses
Gains. If you receive an insurance or other reimbursement that is more than your adjusted
basis in the destroyed or stolen property, you
have a gain from the casualty or theft. You must
include this gain in your income in the year you
receive the reimbursement, unless you choose
to postpone reporting the gain as explained earlier.
Losses. Generally, you can deduct a casualty
loss that is not reimbursable only in the tax year
in which the casualty occurred. This is true even
if you do not repair or replace the damaged
property until a later year. (However, see Disaster Area Losses, later, for an exception.)
You can deduct theft losses that are not reimbursable only in the year you discover your
property was stolen.
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.
Loss on deposits. If your loss is a loss on
deposits at an insolvent or bankrupt financial institution, see Loss on Deposits, earlier.
Lessee's loss. 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. This is true even if the loss occurred or
the liability was paid in a different year. You are
not entitled to a deduction until your liability under the lease can be determined with reasonable accuracy. Your liability can be determined
when a claim for recovery is settled, adjudicated, or abandoned.

Disaster Area Losses
This section discusses the special rules that apply to federally declared disaster area losses. It
contains information on when you can deduct
your loss, how to claim your loss, how to treat
your home in a disaster area, and what tax
deadlines may be postponed. It also lists

Federal Emergency Management Agency
(FEMA) phone numbers. (See Contacting the
Federal Emergency Management Agency
(FEMA), later.)
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. Stafford Disaster Relief and
Emergency Assistance Act. It includes a major
disaster or emergency declaration under the
Act.
A list of the areas warranting public or
individual assistance (or both) under
the Act for 2013 is available at the
Federal Emergency Management Agency
(FEMA) web site at www.fema.gov/news/
disasters.fema.

TIP

When to deduct the loss. You generally must
deduct a casualty loss in the year it occurred.
However, if you have a casualty loss from a federally declared 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. If you make this choice, the
loss is treated as having occurred in the preceding year.
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.

TIP

If you do not choose to deduct your loss on
your return for the earlier year, deduct it on your
return for the year in which the disaster occurred.
Example. You are a calendar year taxpayer. A flood damaged your home this June.
The flood damaged or destroyed a considerable amount of property in your town. Your town
is located in an area designated by FEMA for
public or individual assistance (or both). You
can choose to deduct the flood loss on your
home on last year's tax return. (See How to deduct your loss in the preceding year, later.)
Disaster loss to inventory. If your inventory loss is from a disaster in an area designated by FEMA for public or individual assistance
(or both), you may choose to deduct the loss on
your return or amended return for the immediately preceding year. However, decrease your
opening inventory for the year of the loss so that
the loss will not be reported again in inventories.
Main home in disaster area. If your home
is located in a federally declared disaster area,
you can postpone reporting the gain if you
spend the reimbursement to repair or replace
your home. Special rules apply to replacement
property related to the damage or destruction of
your main home (or its contents) if located in
these areas. For more information, see Gains
Realized on Homes in Disaster Areas in the Instructions for Form 4684.
Home made unsafe by disaster. If your
home is located in a federally declared disaster
Page 13

area, your state or local government may order
you to tear it down or move it because it is no
longer safe to live in because of the disaster. If
this happens, treat the loss in value as a casualty loss from a disaster. Your state or local government must issue the order for you to tear
down or move the home within 120 days after
the area is declared a disaster area.
Figure your loss in the same way as for
casualty losses of personal-use property. (See
Figuring a Loss, earlier.) In determining the decrease in FMV, use the value of your home before you move it or tear it down as its FMV after
the casualty.
Unsafe home. Your home will be considered unsafe only if both of the following apply.
Your home is substantially more dangerous after the disaster than it was before the
disaster.
The danger is from a substantially increased risk of future destruction from the
disaster.
Example. Due to a severe storm, the President declared the county you live in a federal
disaster area. Although your home has only minor damage from the storm, a month later the
county issues a demolition order. This order is
based on a finding that your home is unsafe due
to nearby mud slides caused by the storm. The
loss in your home's value because the mud
slides made it unsafe is treated as a casualty
loss from a disaster. The loss in value is the difference between your home's FMV immediately
before the disaster and immediately after the
disaster.
How to deduct your loss in the preceding
year. If you choose to deduct your loss on your
return or amended return for the tax year immediately preceding the tax year in which the disaster happened, include a statement saying
that you are making that choice. The statement
can be made on the return or can be filed with
the return. The statement should specify the
date or dates of the disaster and the city, town,
county, and state where the damaged or destroyed property was located at the time of the
disaster.
Time limit for making choice. You must
make this choice to take your casualty loss for
the disaster in the preceding year by the later of
the following dates.
The due date (without extensions) for filing
your income tax return for the tax year in
which the disaster actually occurred.
The due date (with extensions) for filing the
return for the preceding tax year.
Example. If you are a calendar year taxpayer, you ordinarily have until April 15, 2014,
to amend your 2012 tax return to claim a casualty loss that occurred during 2013.
Revoking your choice. You can revoke
your choice within 90 days after making it by returning to the Internal Revenue Service any refund or credit you received from making the
choice. However, if you revoke your choice before receiving a refund, you must return the refund within 30 days after receiving it for the revocation to be effective.
Page 14

Figuring the loss deduction. You must
figure the loss under the usual rules for casualty
losses, as if it occurred in the year preceding
the disaster.
Example. A disaster damaged your main
home and destroyed your furniture in 2013. This
was your only casualty loss for the year. Your
home is located in a federally declared disaster
area designated by FEMA for public or individual assistance (or both). The cost of your home
and land was $134,000. The FMV immediately
before the disaster was $147,500 and the FMV
immediately afterward was $100,000. You separately figured the loss on each item of furniture
(see Figuring the Deduction, earlier) and arrived
at a total loss for furniture of $3,000. Your insurance did not cover this type of casualty loss,
and you expect no reimbursement for either
your home or your furniture.
You choose to amend your 2012 return to
claim your casualty loss for the disaster. Your
adjusted gross income (AGI) on your 2012 return was $71,000. You figure your casualty loss
as follows:

House

Furnishings

1. Cost . . . . . . . . . . . . .$134,000

$10,000

2. FMV before
disaster . . . . . . . . . . $147,500
3. FMV after
disaster . . . . . . . . . . 100,000
4. Decrease in FMV
(line 2 − line 3) . . . . $47,500
5. Smaller of line 1 or
line 4 . . . . . . . . . . . . $47,500
6. Subtract estimated
-0insurance . . . . . . . .
7. Loss after
reimbursement . . . . $47,500

$8,000
5,000
$3,000
$3,000
-0$3,000

8.
9.
10.
11.

Total loss . . . . . . . . . . . . . . . . . . $50,500
Subtract $100 . . . . . . . . . . . . . .
100
Loss after $100 rule . . . . . . . . . $50,400
Subtract 10% of $71,000
7,100
AGI . . . . . . . . . . . . . . . . . . . . . . .
12. Amount of casualty loss
deduction . . . . . . . . . . . . $43,300
Claiming a disaster loss on an amended return. If you have already filed your return for
the preceding year, you can claim a disaster
loss against that year's income by filing an
amended return. Individuals file an amended return on Form 1040X.
How to report the loss on Form 1040X.
You should adjust your deductions on Form
1040X. The Instructions for Form 1040X show
how to do this. Explain the reasons for your adjustment and attach Form 4684 to show how
you figured your loss. See Figuring a Loss, earlier.
If the damaged or destroyed property was
nonbusiness property or employee property
and you did not itemize your deductions on
your original return, you must first determine
whether the casualty loss deduction now makes
it advantageous for you to itemize. It is advantageous to itemize if the total of the casualty loss

deduction and any other itemized deductions is
more than your standard deduction. If you itemize, attach Schedule A (Form 1040) or Form
1040NR, Schedule A, and Form 4684 to your
amended return. Fill out Form 1040X to refigure
your tax to find your refund.
Records. You should keep the records that
support your loss deduction. You do not have to
attach them to the amended return.
If your records were destroyed or lost, you
may have to reconstruct them. Information
about reconstructing records is available at
IRS.gov. Type “reconstructing your records” in
the search box, or see Publication 2194, Disaster Resource Guide.
Need a copy of your tax return for the
preceding year? It will be easier to prepare
Form 1040X if you have a copy of your tax return for the preceding year. If you had your tax
return completed by a tax preparer, he or she
should be able to provide you with a copy of
your return. If not, you can get a copy by filing
Form 4506 with the IRS. There is a fee for each
return requested. However, if your main home,
principal place of business, or tax records are
located in a federally declared disaster area,
this fee will be waived. Write the name of the
disaster in the top margin of Form 4506 (for example, “Hurricane Irene”).
Federal loan canceled. If part of your federal
disaster loan was canceled under the Robert T.
Stafford Disaster Relief and Emergency Assistance Act, it is considered to be reimbursement
for the loss. The cancellation reduces your
casualty loss deduction.
Federal disaster relief grants. Do not include
post-disaster relief grants received under the
Robert T. 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. Do not deduct casualty losses or medical expenses to the extent
they are specifically reimbursed by these disaster relief grants. 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. Unemployment assistance payments under the Act are
taxable unemployment compensation.
State disaster relief grants for businesses.
A grant that a business receives under a state
program to reimburse businesses for losses incurred for damage or destruction of property
because of a disaster is not excludable from income under the general welfare exclusion, as a
gift, as a qualified disaster relief payment (explained next), or as a contribution to capital.
However, the business can choose to postpone
reporting gain realized from the grant if it buys
qualifying replacement property within a certain
period of time. See Postponement of Gain, earlier, for the rules that apply.
Qualified disaster relief payments. Qualified
disaster relief payments are not included in the
income of individuals to the extent any
Publication 547 (2013)

Table 3. When To Deduct a Casualty or Theft Loss
IF you have a loss...

THEN deduct it in the year...

from a casualty

the loss occurred.

in a federally declared disaster area

the disaster occurred or the year immediately
before the disaster.

from a theft

the theft was discovered.

on a deposit treated as a casualty

a reasonable estimate can be made.

expenses compensated by these payments are
not otherwise compensated for by insurance or
other reimbursement. These payments are not
subject to income tax, self-employment tax, or
employment taxes (social security, Medicare,
and federal unemployment taxes). No withholding applies to these payments.
Qualified disaster relief payments include
payments you receive (regardless of the
source) for the following expenses.
Reasonable and necessary personal, family, living, or funeral expenses incurred as a
result of a federally declared disaster.
Reasonable and necessary expenses incurred for the repair or rehabilitation of a
personal residence due to a federally declared disaster. (A personal residence can
be a rented residence or one you own.)
Reasonable and necessary expenses incurred for the repair or replacement of the
contents of a personal residence due to a
federally declared disaster.

hazard mitigation program, you can choose to
postpone reporting the gain if you buy qualifying
replacement property within a certain period of
time. See Postponement of Gain, earlier, for the
rules that apply.

Qualified disaster relief payments also include amounts paid to individuals affected by
the disaster by a federal, state, or local government in connection with a federally declared
disaster.

Postponed Tax Deadlines

!

Qualified disaster relief payments do
not include:

CAUTION

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.

Qualified disaster mitigation payments.
Qualified disaster mitigation payments made
under the Robert T. 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. These are
payments you, as a property owner, receive to
reduce the risk of future damage to your property. You cannot increase your basis in the
property, or take a deduction or credit, for expenditures made with respect to those payments.
Sale of property under hazard mitigation
program. 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. You report the gain or deduct
the loss on your tax return for the year you realize it. (You cannot deduct a loss on personal-use property unless the loss resulted
from a casualty, as discussed earlier.) However, if you sell or otherwise transfer property to
the Federal Government, a state or local government, or an Indian tribal government under a
Publication 547 (2013)

Gains. Special rules apply if you choose to
postpone reporting gain on property damaged
or destroyed in a federally declared disaster
area. For these special rules, see the following
discussions.
Main home in disaster area earlier under
Replacement Property.
Business or income-producing property located in a federally declared disaster area
earlier under Replacement Property.
Property in a Midwestern disaster area
earlier under Replacement Period.
Property in the Kansas disaster area earlier under Replacement Period.
Property in the Hurricane Katrina disaster
area earlier under Replacement Period.

The IRS may postpone for up to one year certain tax deadlines of taxpayers who are affected
by a federally declared disaster. 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.
If any tax deadline is postponed, the IRS will
publicize the postponement in your area and
publish a news release and, where necessary,
in a revenue ruling, revenue procedure, notice,
announcement, or other guidance in the Internal
Revenue Bulletin (IRB). Go to www.irs.gov/uac/
Tax-Relief-in-Disaster-Situations to find out if a
tax deadline has been postponed for your area.
Who is eligible. If the IRS postpones a tax
deadline, the following taxpayers are eligible for
the postponement.
Any individual whose main home is located
in a covered disaster area (defined later).
Any business entity or sole proprietor
whose principal place of business is located in a covered disaster area.
Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting
in a covered disaster area.
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. The main home or principal
place of business does not have to be located in the covered disaster area.

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.
The spouse on a joint return with a taxpayer who is eligible for postponements.
Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose records necessary to
meet a postponed tax deadline are located
in the covered disaster area.
Any individual visiting the covered disaster
area who was killed or injured as a result of
the disaster.
Any other person determined by the IRS to
be affected by a federally declared disaster.
Covered disaster area. This is an area of
a federally declared disaster in which the IRS
has decided to postpone tax deadlines for up to
1 year.
Abatement of interest and penalties. The
IRS may abate the interest and penalties on underpaid income tax for the length of any postponement of tax deadlines.

Contacting the Federal
Emergency Management
Agency (FEMA)
If you live in an area that was declared a disaster area by the President, you can get information from FEMA by visiting its website at
www.fema.gov, or calling the following phone
numbers. These numbers are only activated after a federally declared disaster.
1-800-621-3362.
1-800-462-7585, if you are deaf, hard of
hearing, or have a speech disability.

How To Report
Gains and Losses
How you report gains and losses depends on
whether the property was business, income-producing, or personal-use property.
Personal-use property. If you have a loss,
use both of the following.
Form 4684, Casualties and Thefts.
Schedule A (Form 1040), Itemized Deductions (or Form 1040NR, Schedule A, if you
are a nonresident alien).
If you have a gain, report it on both of the following.
Form 4684, Casualties and Thefts.
Schedule D (Form 1040), Capital Gains
and Losses.
Do not report on these forms any gain you
postpone. If you choose to postpone gain, see
How To Postpone a Gain, earlier.
Business and income-producing property.
Use Form 4684 to report your gains and losses.
Page 15

You will also have to report the gains and losses on other forms as explained next.
Property held 1 year or less. Individuals
report losses from income-producing property
and property used in performing services as an
employee on Schedule A (Form 1040). Gains
from business and income-producing property
are combined with losses from business property (other than property used in performing
services as an employee) and the net gain or
loss is reported on Form 4797. If you are not
otherwise required to file Form 4797, only enter
the net gain or loss on your tax return on the line
identified as from Form 4797. Next to that line,
enter “Form 4684.” Partnerships and S corporations should see the Form 4684 instructions to
find out where to report these gains and losses.
Property held more than 1 year. If your
losses from business and income-producing
property are more than gains from these types
of property, combine your losses from business
property (other than property used in performing services as an employee) with total gains
from business and income-producing property.
Report the net gain or loss as an ordinary gain
or loss on Form 4797. If you are not otherwise
required to file Form 4797, only enter the net
gain or loss on your tax return on the line identified as from Form 4797. Next to that line, enter
“Form 4684.” Individuals deduct any loss of income-producing property and property used in
performing services as an employee on Schedule A (Form 1040). Partnerships and S corporations should see Form 4684 to find out where to
report these gains and losses.
If losses from business and income-producing property are less than or equal to gains from
these types of property, report the net amount
on Form 4797. You may also have to report the
gain on Schedule D depending on whether you
have other transactions. Partnerships and S
corporations should see Form 4684 to find out
where to report these gains and losses.
Depreciable property. If the damaged or
stolen property was depreciable property held
more than 1 year, you may have to treat all or
part of the gain as ordinary income to the extent
of depreciation allowed or allowable. You figure
the ordinary income part of the gain in Part III of
Form 4797. See Depreciation Recapture in
chapter 3 of Publication 544 for more information about the recapture rule.

Adjustments to Basis
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. The result is your
adjusted basis in the property.
You must increase your basis in the property
by the amount you spend on repairs that restore
the property to its pre-casualty condition. Do not
increase your basis in the property by any qualified disaster mitigation payments (discussed
earlier under Disaster Area Losses). See Adjusted Basis in Publication 551 for more information on adjustments to basis.

Page 16

If Deductions Are
More Than Income
If your casualty or theft loss deduction causes
your deductions for the year to be more than
your income for the year, you may have a net
operating loss (NOL). You can use an NOL to
lower your tax in an earlier year, allowing you to
get a refund for tax you already paid. Or, you
can use it to lower your tax in a later year. You
do not have to be in business to have an NOL
from a casualty or theft loss. For more information, see Publication 536, Net Operating Losses
(NOLs) for Individuals, Estates, and Trusts.

How To Get Tax Help
Whether it's help with a tax issue, preparing
your tax return or a need for a free publication
or form, get the help you need the way you want
it: online, use a smart phone, call or walk in to
an IRS office or volunteer site near you.
Free help with your tax return. You can get
free help preparing your return nationwide from
IRS-certified volunteers. The Volunteer Income
Tax Assistance (VITA) program helps
low-to-moderate income, elderly, people with
disabilities, and limited English proficient taxpayers. The Tax Counseling for the Elderly
(TCE) program helps taxpayers age 60 and
older with their tax returns. Most VITA and TCE
sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. In addition,
some VITA and TCE sites provide taxpayers
the opportunity to prepare their own return with
help from an IRS-certified volunteer. To find the
nearest VITA or TCE site, you can use the VITA
Locator Tool on IRS.gov, download the IRS2Go
app, or call 1-800-906-9887.
As part of the TCE program, AARP offers
the Tax-Aide counseling program. To find the
nearest AARP Tax-Aide site, visit AARP's website at www.aarp.org/money/taxaide or call
1-888-227-7669. For more information on these
programs, go to IRS.gov and enter “VITA” in the
search box.
Internet. IRS.gov and IRS2Go are ready
when you are —24 hours a day, 7 days a week.
Download the free IRS2Go app from the
iTunes app store or from Google Play. Use
it to check your refund status, order transcripts of your tax returns or tax account,
watch the IRS YouTube channel, get IRS
news as soon as it's released to the public,
subscribe to filing season updates or daily
tax tips, and follow the IRS Twitter news
feed, @IRSnews, to get the latest federal
tax news, including information about tax
law changes and important IRS programs.
Check the status of your 2013 refund with
the Where's My Refund? application on
IRS.gov or download the IRS2Go app and
select the Refund Status option. The IRS
issues more than 9 out of 10 refunds in
less than 21 days. Using these applications, you can start checking on the status
of your return within 24 hours after we receive your e-filed return or 4 weeks after
you mail a paper return. You will also be

given a personalized refund date as soon
as the IRS processes your tax return and
approves your refund. The IRS updates
Where's My Refund? every 24 hours, usually overnight, so you only need to check
once a day.
Use the Interactive Tax Assistant (ITA) to
research your tax questions. No need to
wait on the phone or stand in line. The ITA
is available 24 hours a day, 7 days a week,
and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. When you
reach the response screen, you can print
the entire interview and the final response
for your records. New subject areas are
added on a regular basis.
Answers not provided through ITA may be
found in Tax Trails, one of the Tax Topics
on IRS.gov which contain general individual and business tax information or by
searching the IRS Tax Map, which includes an international subject index.
You can use the IRS Tax Map, to search
publications and instructions by topic or
keyword. The IRS Tax Map integrates
forms and publications into one research
tool and provides single-point access to
tax law information by subject. When the
user searches the IRS Tax Map, they will
be provided with links to related content in
existing IRS publications, forms and instructions, questions and answers, and
Tax Topics.
Coming this filing season, you can immediately view and print for free all 5 types of
individual federal tax transcripts (tax returns, tax account, record of account,
wage and income statement, and certification of non-filing) using Get Transcript.
You can also ask the IRS to mail a return
or an account transcript to you. Only the
mail option is available by choosing the
Tax Records option on the IRS2Go app by
selecting Mail Transcript on IRS.gov or by
calling 1-800-908-9946. Tax return and tax
account transcripts are generally available
for the current year and the past three
years.
Determine if you are eligible for the EITC
and estimate the amount of the credit with
the Earned Income Tax Credit (EITC)
Assistant.
Visit Understanding Your IRS Notice or
Letter to get answers to questions about a
notice or letter you received from the IRS.
If you received the First Time Homebuyer
Credit, you can use the First Time
Homebuyer Credit Account Look-up tool
for information on your repayments and account balance.
Check the status of your amended return
using Where's My Amended Return? Go to
IRS.gov and enter Where's My Amended
Return? in the search box. You can generally expect your amended return to be processed up to 12 weeks from the date we
receive it. It can take up to 3 weeks from
the date you mailed it to show up in our
system.
Make a payment using one of several safe
and convenient electronic payment options
available on IRS.gov. Select the Payment
Publication 547 (2013)

tab on the front page of IRS.gov for more
information.
Determine if you are eligible and apply for
an online payment agreement, if you owe
more tax than you can pay today.
Figure your income tax withholding with
the IRS Withholding Calculator on IRS.gov.
Use it if you've had too much or too little
withheld, your personal situation has
changed, you're starting a new job or you
just want to see if you're having the right
amount withheld.
Determine if you might be subject to the Alternative Minimum Tax by using the
Alternative Minimum Tax Assistant on
IRS.gov.
Request an Electronic Filing PIN by going to IRS.gov and entering Electronic Filing PIN in the search box.
Download forms, instructions and publications, including accessible versions for
people with disabilities.
Locate the nearest Taxpayer Assistance
Center (TAC) using the Office Locator tool
on IRS.gov, or choose the Contact Us option on the IRS2Go app and search Local
Offices. An employee can answer questions about your tax account or help you
set up a payment plan. Before you visit,
check the Office Locator on IRS.gov, or
Local Offices under Contact Us on IRS2Go
to confirm the address, phone number,
days and hours of operation, and the services provided. If you have a special need,
such as a disability, you can request an appointment. Call the local number listed in
the Office Locator, or look in the phone
book under United States Government, Internal Revenue Service.
Apply for an Employer Identification
Number (EIN). Go to IRS.gov and enter
Apply for an EIN in the search box.
Read the Internal Revenue Code, regulations, or other official guidance.
Read Internal Revenue Bulletins.
Sign up to receive local and national tax
news by email. Just click on “subscriptions” above the search box on IRS.gov
and choose from a variety of options.
Phone. You can call the IRS, or you can carry
it in your pocket with the IRS2Go app on your
smart phone or tablet. Download the free
IRS2Go app from the iTunes app store or from
Google Play.
Call to locate the nearest volunteer help
site, 1-800-906-9887 or you can use the
VITA Locator Tool on IRS.gov, or download the IRS2Go app. Low-to-moderate income, elderly, people with disabilities, and
limited English proficient taxpayers can get
free help with their tax return from the nationwide Volunteer Income Tax Assistance
(VITA) program. The Tax Counseling for
the Elderly (TCE) program helps taxpayers
age 60 and older with their tax returns.
Most VITA and TCE sites offer free electronic filing. Some VITA and TCE sites provide IRS-certified volunteers who can help
prepare your tax return. Through the TCE
program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to
find the nearest Tax-Aide location.
Publication 547 (2013)

Call the automated Where's My Refund?
information hotline to check the status of
your 2013 refund 24 hours a day, 7 days a
week at 1-800-829-1954. If you e-file, you
can start checking on the status of your return within 24 hours after the IRS receives
your tax return or 4 weeks after you've
mailed a paper return. The IRS issues
more than 9 out of 10 refunds in less than
21 days. Where's My Refund? will give you
a personalized refund date as soon as the
IRS processes your tax return and approves your refund. Before you call this automated hotline, have your 2013 tax return
handy so you can enter your social security number, your filing status, and the exact
whole dollar amount of your refund. The
IRS updates Where's My Refund? every
24 hours, usually overnight, so you only
need to check once a day. Note, the above
information is for our automated hotline.
Our live phone and walk-in assistors can
research the status of your refund only if
it's been 21 days or more since you filed
electronically or more than 6 weeks since
you mailed your paper return.
Call the Amended Return Hotline,
1-866-464-2050, to check the status of
your amended return. You can generally
expect your amended return to be processed up to 12 weeks from the date we
receive it. It can take up to 3 weeks from
the date you mailed it to show up in our
system.
Call 1-800-TAX-FORM (1-800-829-3676)
to order current-year forms, instructions,
publications, and prior-year forms and instructions (limited to 5 years). You should
receive your order within 10 business
days.
Call TeleTax, 1-800-829-4477, to listen to
pre-recorded messages covering general
and business tax information. If, between
January and April 15, you still have questions about the Form 1040, 1040A, or
1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and
IRAs or self-employment taxes), call
1-800-829-1040.
Call using TTY/TDD equipment,
1-800-829-4059 to ask tax questions or order forms and publications. The TTY/TDD
telephone number is for people who are
deaf, hard of hearing, or have a speech
disability. These individuals can also contact the IRS through relay services such as
the Federal Relay Service.
Walk-in. You can find a selection of forms,
publications and services — in-person.
Products. You can walk in to some post offices, libraries, and IRS offices to pick up
certain forms, instructions, and publications. Some IRS offices, libraries, and city
and county government offices have a collection of products available to photocopy
from reproducible proofs.
Services. You can walk in to your local
TAC for face-to-face tax help. An employee can answer questions about your
tax account or help you set up a payment
plan. Before visiting, use the Office Locator
tool on IRS.gov, or choose the Contact Us
option on the IRS2Go app and search Lo-

cal Offices for days and hours of operation,
and services provided.
Mail. You can send your order for forms, instructions, and publications to the address below. You should receive a response within 10
business days after your request is received.
Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613
The Taxpayer Advocate Service Is Here to Help
You. The Taxpayer Advocate Service (TAS)
is your voice at the IRS. Our job is to ensure
that every taxpayer is treated fairly and that you
know and understand your rights.
What can TAS do for you? We can offer you
free help with IRS problems that you can't resolve on your own. We know this process can
be confusing, but the worst thing you can do is
nothing at all! TAS can help if you can't resolve
your tax problem and:
Your problem is causing financial difficulties for you, your family, or your business.
You face (or your business is facing) an
immediate threat of adverse action.
You've tried repeatedly to contact the IRS
but no one has responded, or the IRS
hasn't responded by the date promised.
If you qualify for our help, you'll be assigned to
one advocate who'll be with you at every turn
and will do everything possible to resolve your
problem. Here's why we can help:
TAS is an independent organization within
the IRS.
Our advocates know how to work with the
IRS.
Our services are free and tailored to meet
your needs.
We have offices in every state, the District
of Columbia, and Puerto Rico.
How can you reach us? If you think TAS can
help you, call your local advocate, whose number is in your local directory and at Taxpayer
Advocate, or call us toll-free at 1-877-777-4778.
How else does TAS help taxpayers?
TAS also works to resolve large-scale, systemic
problems that affect many taxpayers. If you
know of one of these broad issues, please report it to us through our Systemic Advocacy
Management System.

Low Income Taxpayer
Clinics
Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level
and need to resolve tax problems such as audits, appeals and tax collection disputes. Some
clinics can provide information about taxpayer
rights and responsibilities in different languages
for individuals who speak English as a second
language. Visit Taxpayer Advocate or see IRS
Publication 4134, Low Income Taxpayer Clinic
List.
Page 17

Index

To help us develop a more useful index, please let us know if you have ideas for index entries.
See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

A

Abatement of interest and
penalties 15
Accidents 2
Adjusted basis 6
Adjustments to basis 12, 16
Amended returns 13
Appraisals 5
Assistance (See Tax help)

B

Bad debts 4
Basis:
Adjusted 6
Adjustments to 12, 16
Replacement property 12
Business or income-producing
property 4
Business purposes, property
used partly for 10

C

Cars:
Accidents 2
Fair market value of 5
Cash gifts 6
Casualty losses 15
Deductible losses 2
Definition 2
Deposits, loss on 4
Nondeductible losses 2
Progressive deterioration 2
Proof of 4
When to report 13
Workbooks for listing
property 2
Clean up costs 5
Condemnation 2
Corrosive drywall 3
Costs:
Appraisals 5
Clean up 5
Incidental expenses 5
Landscaping 5
Photographs taken after loss 5
Protection 5
Repair 5
Replacement 5

D

Death of taxpayer:
Postponement of gain 11
Deductible losses 2
Deduction limits 8
$100 rule 8
10% rule 8
 2% rule 8
Personal-use and employee
property (Table 2) 7
Deposit losses 3, 15
Reporting of (Table 1) 4
When to report 13
Disaster area losses 13
Claiming on amended
return 14
Federal loan canceled 14

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Federally declared
disaster 12, 13
Figuring loss deduction 14
Form 1040X 14
Home made unsafe 13
How to deduct loss in
preceding year 14
Inventory 13
Main home rules 12, 15
Qualified disaster mitigation
payments 15
Qualified disaster relief
payments 14
Records to keep 14
Tax deadlines postponed 15
When to deduct 13
Table 3 15
Disaster mitigation
payments 15
Disaster relief grants 6
Drywall, corrosive 3
Due dates:
Tax deadlines postponed 15

E

Employee property:
Deduction limits (Table 2) 7
Employer's emergency disaster
fund 6

F

Fair market value (FMV):
Decline in value of property in
or near casualty area 5
Measuring decrease in 5
Items not to consider 5
Items to consider 5
Federal disaster relief
grants 14
Federal Emergency
Management Agency
(FEMA), contacting 15
Federally declared
disasters 12, 13
Figuring gain 10
Figuring loss 4, 9
Adjusted basis 6
Disaster area losses 14
Insurance and other
reimbursements 6
Form 1040, Schedule A 15
Form 1040, Schedule D 15
Form 1040X:
Disaster area losses 14
Form 4684:
Reporting gains and losses on
personal-use property 15
Free tax services 16

G

Gains:
Figuring 10
Postponement of 11, 12
Reimbursements 4
Reporting of 15
When to report 13

H

Help (See Tax help)

I

Incidental expenses 5
Insurance 6
Living expenses, payments
for 6
Interest abatement 15
Inventory losses 4
Disaster area losses 13

L

Landscaping 5
Leased property 4
When to report 13
Losses:
Casualty (See Casualty losses)
Deposits (See Deposit losses)
Disaster areas (See Disaster
area losses)
Figuring amount (See Figuring
loss)
Proof of 4
Records of 4
Reporting of 15
Theft (See Theft losses)
When to report 13
(Table 3) 15

M

Married taxpayers:
Deduction limits 8, 9
Mislaid or lost property 3
Missing children, photographs
of 1

N

Nonbusiness bad debts 4
Nondeductible losses 2

P

Payments for living expenses 6
Penalty abatement 15
Personal property:
Loss deduction, figuring of 9
Personal-use property:
Deduction limits (Table 2) 7
Reporting gains and losses 15
Personal-use real property 4
Photographs:
Documentation of loss 5
Ponzi-type investment
schemes 3
Postponed tax deadlines 15
Postponement of gain 11, 12
Amended return 13
Changing mind 13
Replacement property acquired
after return filed 13
Replacement property acquired
before return filed 13
Required statement 12

Substituting replacement
property 13
Three-year limit 13
Proof of loss 4
Protection costs 5
Publications (See Tax help)

R

Records of loss 4
Recovered stolen property 5
Reimbursements:
Cash gifts 6
Disaster relief 6
Employer's emergency disaster
fund 6
Failure to file a claim 6
Received after deducting
loss 7
Types of 6
Related expenses 5
Related person, replacement
property bought from 11
Repair costs 5
Replacement cost 5
Replacement period 12
Extension of 12
Replacement property 11
Advance payment 11
Basis adjustment to
corporation's property 12
Basis of 12
Main home 12
In disaster area 13
Postponement of gain 13
Reporting gains and losses 11,
15
Basis, adjustments to 16
Business and
income-producing
property 15
Deductions exceeding
income 16
Deposits 4
Table 1 4
Disaster area losses 14
Personal-use property 15
Timing of 13

S

Sentimental value 5
State disaster relief grants for
businesses 14
Stolen property (See Theft
losses)

T

Tables and figures:
Deduction limit rules for
personal-use and employee
property (Table 2) 7
Reporting loss on deposits
(Table 1) 4
When to deduct losses
(Table 3) 15
Tax help 16
Theft losses 3
FMV of stolen property 5
Publication 547 (2013)

Theft losses (Cont.)
Mislaid or lost property 3
Proof of 4
When to deduct (Table 3) 15
When to report 13

Publication 547 (2013)

Workbooks for listing
property 2
Timber loss 11

W

Workbooks for property lost
due to casualties and
thefts 2

Page 19