Accounting & Bookkeeping & Small Business Forum

[Guest]

Hurricane Charley: Tax Implications

Our thoughts and prayers are with the people who have suffered at the hands of the most recent hurricane.

As tax professionals we are in a position to offer hope and professional guidance to our clients, their families and associates.

A casualty loss in a federally declared disaster areas can be deducted in either the year the loss occurred or the year preceding the loss. Taxpayers should consider the benefits of filing for the year that gives the greater advantage. A loss in 2004 can be deducted on a 2003 amended tax return.

A statement must be included with the amended return that specifies the date(s) of the disaster and the city, town, county and state where the damage or destroyed property was located. Indicate that the loss is being claimed in the year preceding the disaster.

Special rules apply to homes damaged or destroyed in an area declared by the President to warrant federal assistance as a result of a disaster (Code 1033(h)).

Renters receiving insurance proceeds also qualify for relief under these rules.

No gain is recognized from insurance proceeds for unscheduled personal property (items that are not specifically listed as covered under an insurance policy) that was part of the contents of the home.

Under Revenue Ruling 2003-12, gross income does not include any amount received by an individual as a "qualified disaster" relief payment. The government, a charity or an employer can make the payments. Qualified payments include amounts to reimburse or pay any reasonable and necessary expenses for:

1. Personal, family living or funeral expenses
2. Repair of personal residence or its contents
3. Temporary housing
4. Transportation
5. Medical

IRS Response to Hurricane Charley

It is anticipated that the IRS will issue a formal announcement concerning the immediate consequences of Hurricane Charley. There was nothing specific posted to the agency's web site at the time of this e-mail. There is an August 16 filing deadline that must be addressed by the Service. As in the case of September 11, the Service can be expected to be reasonable in granting an extension for affected taxpayers.

Visit www.IRS.gov for the most up-to-date information.

[Guest]

Thanks for sharing your knowledge with us.