Disaster Area Losses This section discusses the special rules that apply toPresidentially declared disaster area losses. It contains informationon when you can deduct your loss, how to claim your loss, and thetreatment of your home in a disaster area. A Presidentiallydeclared disaster is a disaster that occurred in an areadeclared by the President to be eligible for federal assistance underthe Disaster Relief and Emergency Assistance Act. When to deduct the loss. If you have a casualty loss from a disaster that occurred in aPresidentially declared disaster area, you can choose to deduct thatloss on your return or amended return for the tax year immediatelypreceding the tax year in which the disaster happened. If you makethis choice, the loss is treated as having occurred in the precedingyear. Claiming a qualifying disaster loss on the previous year's returnmay result in a lower tax for that year, often producing or increasinga cash refund. If you do not choose to deduct your loss on your return for theearlier year, deduct it on your return for the year in which thedisaster occurred. Example. You are a calendar year taxpayer. A flood damaged your home thisJune. The flood damaged or destroyed a considerable amount of propertyin your town. The town was declared a federal disaster area as aresult of the flood. You can choose to deduct the flood loss on yourhome on last year's tax return. Disaster loss to inventory. If your inventory loss is from a disaster in an area declared bythe President of the United States to be eligible for federalassistance, you may choose to deduct the loss on your return oramended return for the immediately preceding year. However, decreaseyour opening inventory for the year of the loss so that the loss willnot be reported again in inventories. Home made unsafe by disaster. If your home is located in a federal disaster area, your state orlocal government may order you to tear it down or move it because itis 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 stateor local government must issue the order for you to tear down or movethe home within 120 days after the area is declared a disaster area. Figure your loss in the same way as for casualty losses ofpersonal-use property. (See Figuring a Loss, earlier.) Usethe value of your home before you move it or tear it down as its FMVafter the casualty. Unsafe home.ERROR MSG Your home will be considered unsafe only if both of the followingapply. Your home is substantially more dangerous after the disasterthan it was before the disaster. The danger is from a substantially increased risk of futuredestruction from the disaster. You do not have a casualty loss if your home is unsafe due todangerous conditions existing before the disaster. (For example, thelocation of your house is in an area known for severe storms.) This istrue even if your home is condemned. Example. Because of a severe storm, the county you live in is declared afederal disaster area. Although your home has only minor damage fromthe storm, a month later the county issues a demolition order. Thisorder is based on a finding that your home is unsafe due to nearby mudslides caused by the storm. The loss in your home's value because themud slides made it unsafe is treated as a casualty loss from adisaster. The loss in value is the difference between your home's FMVimmediately 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 returnfor the tax year immediately preceding the tax year in which thedisaster happened, include a statement saying that you are making thatchoice. The statement can be made on the return or can be filed withthe return. The statement should specify the date or dates of thedisaster and the city, town, county, and state where the damaged ordestroyed 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 thedisaster in the preceding year by the later of the following dates. The due date (without extensions) for filing your income taxreturn for the tax year in which the disaster actuallyoccurred. The due date (with extensions) for the return for thepreceding tax year. Example. If you are a calendar year taxpayer, you ordinarily have untilApril 15, 1999, to amend your 1997 tax return to claim a casualty lossthat occurred during 1998. Hotel y vuelo baratos SelfossRevoking your choice. You can revoke your choice within 90 days after making it byreturning to the Internal Revenue Service any refund or credit youreceived from making the choice. However, if you revoke your choicebefore receiving a refund, you must return the refund within 30 daysafter receiving it for the revocation to be effective. regles du pai gowFiguring the loss deduction. You must figure the loss under the usual rules for casualtylosses, as if it occurred in the year preceding the disaster. Example. A disaster damaged your home and destroyed your furniture. This wasyour only casualty loss for the year. The area was later determined towarrant federal assistance. The cost of your home and land was$34,000. The FMV immediately before the disaster was $47,500 and theFMV immediately afterwards was $15,000. You separately figured theloss on each item of furniture (see Figuring the Deduction,ERROR MSGearlier) and arrived at a total loss for furniture of $3,000.Your insurance did not cover this type of casualty loss, and youexpect no reimbursement for either your home or your furniture. You choose to amend your previous year's return to claim yourcasualty loss for the disaster. Your adjusted gross income was$40,000. You figure your casualty loss as follows: Furnish- House ings 1. Cost    $34,000    $10,000 2. FMV before disaster $47,500 $8,000 3. FMV after disaster     15,000      5,000 4. Decrease in FMV (line 2 minus line 3)    $32,500     $3,000 5. Smaller of line 1 or line 4 $32,500 $3,000 6. Subtract estimated insurance        -0-        -0- 7. Loss after reimbursement    $32,500     $3,000 8. Total loss $35,500 9. Subtract $100        100 10. Loss after $100 rule $35,400 11. Valkenburg accommodationSubtract 10% of $40,000 AGI      4,000 12. Amount of casualty loss deduction $31,400 Claiming a disaster loss on an amended return. If you have already filed your return for the preceding year, youcan claim a disaster loss against that year's income by filing anamended 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 instructionsfor Form 1040X explain how to do this. Explain the reasons for youradjustment and attach Form 4684 to show how you figured your loss. SeeFiguring a Loss, earlier. If the damaged or destroyed property was nonbusiness property andyou did not itemize your deductions on your original return, you mustfirst determine whether the casualty loss deduction now makes itadvantageous for you to itemize. It is advantageous to itemize if thetotal of the casualty loss deduction and any other itemized deductionsis more than your standard deduction. If you itemize, attach ScheduleA (Form 1040) along with Form 4684, to your amended return. Fill outForm 1040X to refigure your tax on the rest of the form to find yourrefund. Records. You should keep the records that support your loss deduction. Youdo not have to attach them to the amended return. Grants. You do not have to include grants received under the DisasterRelief and Emergency Assistance Act in your gross income. However, youcannot deduct a casualty loss to the extent you are specificallyreimbursed for it by the grant. Federal loan canceled. If part of your federal disaster loan was canceled under theDisaster Relief and Emergency Assistance Act, it is considered to bereimbursement for the loss. The cancellation reduces your casualtyloss deduction. Special rules for main home in a disaster area. Special rules regarding gains may apply to insurance proceeds youreceive because of the damage to or destruction of your main home(whether owned or rented) or its contents. For a discussion of theserules, see Gains Realized on Homes in Disaster Areas in theinstructions for Form 4684. Interest abatement on underpayments in disaster areas. The IRS will abate interest for the length of the extension periodgranted to all taxpayers who meet both of the following requirements. They were located in an area declared a disaster area by thePresident after 1997. They were granted extensions to file income tax returns andpay income tax for tax years beginning after 1997. For individuals living in an area declared a disaster area by thePresident during 1998, the IRS will also abate interest on income taxfor the length of any extension period granted for filing their 1997income tax returns and paying income tax for that year. Some individuals who were granted an extension may have beencharged interest on income tax owed for 1997. To the extent possible,the IRS will identify individuals eligible for the retroactiveabatement of interest. The IRS will make appropriate adjustments totheir accounts, notify them when these adjustments have been made,and, where appropriate, refund interest paid. If you are eligible for retroactive interest abatement, but arenot notified by the end of 1999 that interest has been abated, callIRS Customer Service at 1-800-829-1040 torequest abatement of interest. If you are eligible for interestabatement, you can also file Form 843, Claim for Refund andRequest for Abatement, hôtels Bruxelleswith the IRS Service Center where youfiled your tax return.