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I have questions about filing for casualty losses from a CA…

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I have questions about filing for casualty losses from a CA wildfire. We had insurance-reimbursed destruction of our garage and the non-vehicle contents, landscaping, minor house damage, and the pool electricity. We had non- reimbursed damage to the three uninsured classic vehicles, the forest on two adjoining five acre lots, and our commercial mandarin orchard.

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Customer reply replied 4 months ago
My questions: I don't want to bother adding up all the insurance-reimbursed damages to our garage, its contents, the landscaping, and the electricity and PVC water supply pipe. They are not losses. They've been reimbursed. Will that be a big issue if I don't include them?
Much of our uninsured loss was to our commercial mandarin orchard. I have a determination from a USDA forester of how many trees are dead or damaged. How do I determine the value of a mature, fruit-bearing tree? Is there a reduction of the amount we can claim for a business loss that is based on AGI, as there is for personal loss?
We also had two neighboring five acre lots on which the forest has all burned. I know it has affected the current FMV, but how can I determine that without having to pay an appraiser hundreds of dollars?
We also lost three uninsured classic cars. What is required of me to do to determine their FMV?
Answered in 17 minutes by:
3/7/2018
Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,186
Experience: Former IRS Revenue Agent
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I'm Fiona, former IRS revenue agent. I am looking at your question and will get back to you soon. Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP,IMTA

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Dear Customer,

It seems that you have both personal and business loss. Which tax forms are you reporting the losses on? Make sure that the loss is reported on the correct form with the business or personally.

1) It does not matter that you don't report the parts reimbursed and with no loss. However, you have to keep clear record to show that you did not come out ahead by having the insurance coverage. Therefore, the better way to deal with the reporting on casualty loss on all and deduct the insurance recovery on the claim form.

The IRS' standard is line by line for every items of the loss.

2) "it has affected the current FMV, but how can I determine that without having to pay an appraiser hundreds of dollars?"

No, dealing with the IRS casualty reporting is a tedious job. We have to have subjective valuation methods used. Your loss seems to be in thousands. Hundreds of appraisal fee are necessary. To calculate the fare market value is relatively completely complicated. You may want to consult with the IRS instruction for Form 4686 to see some of the outlines of various methods one may use.

https://www.irs.gov/pub/irs-pdf/i4684.pdf

The IRS has an entire website deal with the subject on valuation for claiming disaster loss. The website link is enclosed below. Just by looking at the website can help us understand why we need professional appraisal help.

https://www.irs.gov/businesses/small-businesses-self-employed/faqs-for-disaster-victims-casualty-loss-valuations-and-sections-165-i

3) The fruit bearing tree loss is complicated in terms of the reimbursement possible from the USDA. Make sure that you include all kinds of possible ways for you to recover loss. The IRS is the last place to claim. Document every effort you have tried to get recovery for the loss.

5) We cannot claim loss as a percentage of your AGI.

6) For the vehicle loss, make sure whether it is business or personal loss. Casualty loss of the vehicles is deductible loss.

Please feel free to follow up. Please notice that our answer is general in nature. For particular item by item questions of your great loss, we cannot address here.

Regards,

Fiona

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Customer reply replied 4 months ago
What I meant by the percentage of the AGI is that for personal losses there is a limitation that is figured on a percentage of your income. Is there a similar limitation on business losses?.
Regarding the trees, we have applied for USDA assistance and I think they will help us with part of the cost of replacing trees with 'baby' trees, but those are different in value from mature trees since it will be 4 or 5 years before they even start production, let alone produce like the trees which were 11 and 12 years old. I am not sure how to figure the difference.

Dear Customer,

Part I.

For business return, it depends on the type of business return you file. Casualty loss reported on Form 4684 is then reported on Form 4797, line 14, to carry to various individual business returns including Schedule A. For example, on Form 1120, it is reported on line 9 as net loss. I cannot think of any limitation on this loss deduction on Form 1120 based on income level.

Part II.

Provided that you are in the industry and cannot calculate the basis, it is a good example of why you need professional appraiser to value your crop loss for you.

Regards,

Fiona

Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,186
Experience: Former IRS Revenue Agent
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