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Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 54001
Experience:  29 years of experience as a tax, real estate, and business attorney.
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My foundation suddenly collapsed in June after a torrential

Customer Question

My foundation suddenly collapsed in June after a torrential downpour with flooding in my street. I was told it was weakened by the coldest feb in history And there were no signs of damage until that night. Then everything in my basement was ruined as the water backed up through the sump pump and I had no flood insurance.
Submitted: 1 year ago.
Category: Tax
Expert:  Richard replied 1 year ago.
Hi! My name is ***** ***** I look forward to helping you!
I don't see a question. How can I help?
Customer: replied 1 year ago.
My foundation suddenly collapsed in June during a torrential downpour. Everything in my basement was destroyed as there was no electricity. The collapse was thought to be related to the coldest February in history and there was no evidence of a problem prior to or after February
Expert:  Richard replied 1 year ago.
Thanks for responding. I understand the facts; I just don't see the question you are asking me to address.
Customer: replied 1 year ago.
I need to know what will be deductible on my income tax and what proof I need.
Expert:  Richard replied 1 year ago.
Thanks. I addressed this for you this morning. You must have not received my response. Yes, you are entitled to a deduction as a casualty loss. Pursuant to IRS Tax Topic 515 (http://www.irs.gov/taxtopics/tc515.html):
"Generally, you may deduct casualty and theft losses relating to your home, household items and vehicles on your federal income tax return. You may not deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement, and you reduce the loss by the amount of any reimbursement or expected reimbursement.
A casualty loss can result from the damage, destruction or loss of your property from any sudden, unexpected or unusual event such as a flood, hurricane, tornado, fire, earthquake or volcanic eruption. A casualty does not include normal wear and tear or progressive deterioration.
If your property is personal-use property or is not completely destroyed, the amount of your casualty loss is the lesser of:
The adjusted basis of your property, or
The decrease in fair market value of your property as a result of the casualty
The amount of your theft loss is generally the adjusted basis of your property because the fair market value of your property immediately after the theft is considered to be zero.
You must reduce the loss, whether it is a casualty or theft loss, by any salvage value and by any insurance or other reimbursement you receive or expect to receive. The adjusted basis of your property is usually your cost, increased or decreased by certain events such as improvements or depreciation. You may determine the decrease in fair market value by appraisal, or if certain conditions are met, by the cost of repairing the property.
Individuals are required to claim their casualty and theft losses as an itemized deduction on Form 1040, Schedule A (PDF), Itemized Deductions, (or Schedule A in Form 1040NR (PDF), if you are a nonresident alien). For property held by you for personal use, you must subtract $100 from each casualty or theft event that occurred during the year after you have subtracted any salvage value and any insurance or other reimbursement. Then add up all those amounts and subtract 10% of your adjusted gross income from that total to calculate your allowable casualty and theft losses for the year.
Report casualty and theft losses on Form 4684 (PDF), Casualties and Thefts. Use Section A for personal-use property and Section B for business or income-producing property. If personal-use property was damaged, destroyed or stolen, you may wish to refer to Publication 584, Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property). For losses involving business-use property, refer to Publication 584-B (PDF), Business Casualty, Disaster, and Theft Loss Workbook.
Casualty losses are generally deductible in the year the casualty 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 treat the loss as having occurred in the year immediately preceding the tax year in which the disaster happened, and you can deduct the loss on your return or amended return for that preceding tax year. Review Disaster Assistance and Emergency Relief for Individuals and Businesses on IRS.gov, for information regarding timeframes and additional information to your specific qualifying event."
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