Table of Contents
Use Section A to figure casualty or theft gains and losses for property that is not used in a trade or business or for income-producing purposes. Also use Section A to figure casualty or theft losses and gains related to the portion of your home used for business if you used the simplified method to determine your deductible expenses for business use of your home.
Casualty or theft losses of personal use property are deductible only to the extent that the amount of the loss from each separate casualty or theft is more than $100 and the total amount of all losses (as so reduced) during the year is more than 10% of your AGI (Form 1040, line 38, or Form 1040NR, line 37).
Use Section B to figure casualty or theft gains and losses for property that is used in a trade or business or for income-producing purposes.
If property is used partly in a trade or business and partly for personal purposes, such as a personal home with a rental unit, figure the personal part in Section A and the business part in Section B.
Use Section C to figure a theft loss deduction from a Ponzi-type investment scheme if you qualify to use Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, and choose to follow the procedures in the guidance. Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. You do not need to complete Appendix A. See Losses From Ponzi-Type Investment Schemes, later.
Use a separate column for lines 2 through 9 to show each item lost or damaged from a single casualty or theft described on line 1. If more than four items were lost or damaged, use additional sheets following the format of lines 1 through 9.
Use a separate Form 4684 through line 12 for each casualty or theft involving property not used in a trade or business or for income-producing purposes.
Do not include any loss previously deducted on an estate tax return.
If you are liable for casualty or theft losses to property you lease from someone else, see Leased property under Figuring a Loss in Pub. 547.
Describe the type of property (for example, furniture, jewelry, car, etc.).
If you claim a disaster loss (defined earlier), specify the date(s) of the disaster and the city, town, county or parish, and state in which the damaged or destroyed property was located. Include this information on line 1 or on an attached statement.
Cost or other basis usually means original cost plus improvements. Subtract any postponed gain from the sale of a previous main home. Special rules apply to property received as a gift or inheritance. See Basis Other Than Cost in Pub. 551, Basis of Assets, for details. 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, Allocation of Increase in Basis for Property Received From a Decedent, refer to the information provided by the executor or see Pub. 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010.
Enter on this line the amount of insurance or other reimbursement you received or expect to receive for each property. Include your insurance coverage whether or not you are filing a claim for reimbursement. For example, your car worth $2,000 is totally destroyed in a collision. You are insured with a $500 deductible, but decide not to report it to your insurance company because you are afraid the insurance company will cancel your policy. In this case, enter $1,500 on this line.
If you expect to be reimbursed but have not yet received payment, you must still enter the expected reimbursement from the loss. If, in a later tax year, you determine with reasonable certainty that you will not be reimbursed for all or part of the loss, you can deduct for that year the amount of the loss that is not reimbursed.
Part of a federal disaster loan is forgiven, the part you do not have to pay back is considered a reimbursement.
The person who leases your property must make repairs or must repay you for any part of a loss, the repayment and the cost of the repairs are considered reimbursements.
A court awards you damages for a casualty or theft loss, the amount you are able to collect, minus lawyers' fees and other necessary expenses, is a reimbursement.
You accept repairs, restoration, or cleanup services provided by relief agencies, it is considered a reimbursement.
A bonding company pays you for a theft loss, the payment is also considered a reimbursement.
If you are entitled to an insurance payment or other reimbursement for any part of a casualty or theft loss but you choose not to file a claim for the loss, you cannot realize a gain from that payment or reimbursement. Therefore, figure the gain on line 4 by subtracting your cost or other basis in the property (line 2) only from the amount of reimbursement you actually received. Enter the result on line 4, but do not enter less than zero.
If you filed a claim for reimbursement but did not receive it until after the year of the casualty or theft, include the gain in your income in the year you received the reimbursement.
Fair market value (FMV) is the price at which the property would be sold between a willing buyer and a willing seller, each having knowledge of the relevant facts. The difference between the FMV immediately before the casualty or theft and the FMV immediately after represents the decrease in FMV because of the casualty or theft.
The FMV of property after a theft is zero if the property is not recovered.
FMV is generally determined by a competent appraisal. The appraiser's knowledge of sales of comparable property about the same time as the casualty or theft, knowledge of your property before and after the occurrence, and the methods of determining FMV are important elements in proving your loss.
The appraised value of property immediately after the casualty must be adjusted (increased) for the effects of any general market decline that may occur at the same time as the casualty or theft. For example, the value of all nearby property may become depressed because it is in an area where such occurrences are commonplace. This general decline in market value is not part of the property's decrease in FMV as a result of the casualty or theft.
Replacement cost or the cost of repairs is not necessarily FMV. However, you may be able to use the cost of repairs to the damaged property as evidence of loss in value if:
The repairs are actually made,
The repairs are necessary to restore the property to the condition it was in immediately before the casualty,
The amount spent for repairs is not excessive,
The repairs only correct the damage caused by the casualty, and
The value of the property after the repairs is not, as a result of the repairs, more than the value of the property immediately before the casualty.
To figure a casualty loss to real estate not used in a trade, business, or for income-producing purposes, measure the decrease in value of the property as a whole. All improvements, such as buildings, trees, and shrubs, are considered together as one item. Figure the loss separately for other items. For example, figure the loss separately for each piece of furniture.
If line 14 is more than line 13:
Combine your short-term gains with your short-term losses and include the net short-term gain or (loss) on Schedule D (Form 1040), line 4. Estates and trusts include this amount on Schedule D (Form 1041), line 4.
Combine your long-term gains with your long-term losses and include the net long-term gain or (loss) on Schedule D (Form 1040), line 11. Estates and trusts include this amount on Schedule D (Form 1041), line 11.
The holding period for long-term gains and losses is more than 1 year. For short-term gains and losses, it is 1 year or less. To figure the holding period, begin counting on the day after you received the property and include the day the casualty or theft occurred.
Generally, if you inherit property, you are considered to have held the property for longer than 1 year, regardless of how long you actually held it. If you inherited property from someone who died in 2010 and the executor made the election to file Form 8939, refer to the information provided by the executor or see Pub. 4895 to determine your holding period.
Use a separate column of Part I, lines 20 through 27, to show each item lost or damaged from a single casualty or theft described on line 19. If more than four items were lost or damaged, use additional sheets following the format of Part I, lines 19 through 27.
Use a separate Form 4684, Section B, Part I, for each casualty or theft involving property used in a trade or business or for income-producing purposes. Use one Section B, Part II, to combine all Sections B, Part I.
For details on the treatment of casualties or thefts to business or income-producing property, including rules on the loss of inventory through casualty or theft, see Figuring a Loss in Pub. 547.
If you had a casualty or theft loss involving a home you used for business or rented out, your deductible loss may be limited. First, complete Form 4684, Section B, lines 19 through 26. If the loss involved a home used for a business for which you are filing Schedule C (Form 1040), Profit or Loss From Business, figure your deductible casualty or theft loss on Form 8829, Expenses for Business Use of Your Home (if you are using Form 8829). Enter on Form 4684, line 27, the deductible loss from Form 8829, line 34, and “See Form 8829” above line 27. For a home you rented out or used for a business for which you are not filing Schedule C (Form 1040), see section 280A(c)(5) to figure your deductible loss. Attach a statement showing your computation of the deductible loss, enter that amount on line 27 and “See attached statement” above line 27.
If you used the simplified method to determine your deductible expenses for business use of your home for 2014, figure the casualty or theft loss for the home office in Section A instead of on Form 8829 and Section B.
A gain or loss from a casualty or theft of property used in a passive activity is not taken into account in determining the loss from a passive activity unless losses similar in cause and severity recur regularly in the activity. See Form 8582, Passive Activity Loss Limitations, and its instructions for details.
The IRS has issued the following guidance to assist taxpayers who are victims of losses from Ponzi-type investment schemes.
If you qualify to use Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, and choose to follow the procedures in the guidance, first fill out Section C to determine the amount to enter on Section B, line 28. Skip lines 19 to 27. 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 instructions for Section C later and the above revenue ruling and revenue procedures.
If you choose not to use the procedures in Revenue Procedure 2009-20, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate.
Partnerships (other than electing large partnerships) and S corporations that have a casualty or theft involving property for which the section 179 expense deduction was previously claimed and passed through to the partners or shareholders must not use Form 4684 to report the transaction. Instead, see the Instructions for Form 4797 for details on how to report it. Partners and S corporation shareholders who receive a Schedule K-1 reporting such a transaction should see the Instructions for Form 4797 for details on how to figure the amount to enter on Form 4684, line 20.
If you are claiming a loss from a fraudulent investment arrangement and you are not filling out Section C, you must enter the name, Taxpayer Identification Number (if known), and address (if known) of the individual or entity that conducted the fraudulent arrangement. Complete the rest of Section B, Part I.
Cost or adjusted basis usually means original cost plus improvements, minus depreciation allowed or allowable (including any section 179 expense deduction), amortization, depletion, etc. Special rules apply to property received as a gift or inheritance. See Basis Other Than Cost in Pub. 551 for details. 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 Pub. 4895.
If the amount on line 28 includes losses on property held 1 year or less, and losses on property held for more than 1 year, you must allocate the amount between lines 29 and 34 according to how long you held each property. Enter on line 29 all gains and losses on property held 1 year or less. Enter on line 34 all gains and losses on property held more than 1 year, except as provided in the instructions for line 33.
If you are claiming a theft loss from a Ponzi-type investment scheme and are following the procedures in Revenue Procedure 2009-20, 2009-14 I.R.B. 749, enter on line 28 the amount from Section C, line 51. Do not complete Section B, lines 19 to 27 of Form 4684 for that loss. You must fill out Section B, Part II.
On lines 29 and 34, use a separate line to identify each casualty or theft. If you have more than two casualties or thefts, attach an additional sheet following the format of lines 29 and 34.
Ishmael is claiming two casualty losses for his business property. One loss is due to a fire in July and the other loss is due to a hurricane in October. He fills out one Section B, Part I for the fire and another separate Section B, Part I for the hurricane. He held the property for one year or less. He fills out only one Section B, Part II, to summarize the two losses he is claiming. On line 29, he enters “Fire” on the first line and “Hurricane” on the second line.
Enter the part of line 28 from trade, business, rental, or royalty property (other than property you used in performing services as an employee).
Enter the part of line 28 from income-producing property and from property you used in performing services as an employee. Income-producing property is property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art.
On line 29, enter the part of line 22 that is from property held for one year or less.
On line 34, enter the part of line 22 that is from property held for more than one year.
Include in the total any amounts from the additional sheet you attached because you had more than two casualties or thefts on line 29.
If Form 4797, Sales of Business Property, is not otherwise required, enter the amount from this line on page 1 of your tax return, on the line identified as from Form 4797. Next to that line, enter “Form 4684.”
Estates and trusts, enter on the “Other deductions” line of your tax return. Partnerships (except electing large partnerships), enter on Form 1065, Schedule K, line 13d. Electing large partnerships, enter on Form 1065-B, Part II, line 11. S corporations, enter on Form 1120S, Schedule K, line 12d. Next to that line, enter “Form 4684.”
If you had a casualty or theft gain from certain trade, business, or income-producing property held more than 1 year, you may have to recapture part or all of the gain as ordinary income. See the instructions for Form 4797, Part III, for more information on the types of property subject to recapture. If recapture applies, complete Form 4797, Part III, and this line, instead of Form 4684, line 34.
Include in the total any amounts from the additional sheet you attached because you had more than two casualties or thefts.
Fill out this section if you claim a theft loss deduction for a Ponzi-type investment scheme and you meet both of the following conditions.
You qualify to use Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58.
You choose to follow the procedures in the guidance.
If you meet both conditions, fill out Section C in lieu of Appendix A in Revenue Procedure 2009-20.
For more information about claiming a theft loss deduction from a Ponzi-type investment scheme, see the following guidance.
Enter the initial amount of cash or basis of property that you invested in the investment arrangement. Do not include any of the following on this line, line 41, or line 42:
Amounts borrowed from the responsible group and invested in the specified fraudulent arrangement, to the extent the borrowed amounts were not repaid at the time the theft was discovered;
Amounts such as fees that were paid to the responsible group and deducted for federal income tax purposes;
Amounts reported to you (the qualified investor) as taxable income that were not included in gross income on the investor's federal income tax returns; or
Cash or property that you (the qualified investor) invested in a fund or other entity (separate from you (the qualified investor) for federal income tax purposes) that invested in a specified fraudulent arrangement.
For definitions of responsible group, specified fraudulent arrangement, and qualified investor, see Section 4 of Revenue Procedure 2009-20.
Enter the amounts of cash or the basis of property that you invested after you made the initial investment (including amounts reinvested).
Enter the total amounts of net income (for example, interest and dividends minus expenses) from the specified fraudulent arrangement that, consistent with information received from that arrangement, you included in income for federal tax purposes for all tax years before the discovery year, including tax years for which a refund is barred by the statute of limitations.
The indictment, information, or complaint described in section 4.02(1) or (2) of Revenue Procedure 2009-20 (as modified by Revenue Procedure 2011-58) is filed; or
The complaint or similar document described in section 4.02(3) of Revenue Procedure 2009-20 (as modified by Revenue Procedure 2011-58) is filed, or the death of the lead figure occurs, whichever is later.
Enter the total amount of cash or property that you withdrew from the investment arrangement in all years (whether designated as income or principal).
This is the amount of your investment that is eligible for a deduction before any actual or potential recoveries are taken into account.
Insurance policies in your name that protect you from this type of loss;
Contractual arrangements, other than insurance, that guaranteed or otherwise protected against this type of loss; or
Amounts payable from SIPC, as advances for customer claims under the Securities Investor Protection Act of 1970, or by a similar entity under a similar provision.
Enter the amounts you actually received as a reimbursement or recovery from any source. Do not include amounts that are potential direct recoveries (defined earlier) or potential third-party recoveries (defined earlier).
Enter the amount from line 51 on line 28 of Section B. Do not complete lines 19 to 27 for this loss. Then completeSection B, Part II.
Read the statements and declarations in this part carefully. Enter the required information in the spaces provided. You are agreeing to these statements and declarations when you sign your tax return. The information that you enter in this part will be used to verify the fraudulent investment arrangement.
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