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Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.
Thank you. We are receiving $20,000 of compensation for property worth $90,000 that was stolen. Now my wife is reminding me that our tax preparer may have had us take a deduction of some type on our taxes last year for the losses. (frankly, i'm not sure if that is true, we'll have to find out)
However, if we took a deduction for the losses of 90,000, does that change your answer. Thank you very much.
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.
Link to Publication 525