Casualties & Thefts

As a result of a casualty or theft, you may have a loss related to your property. You may be able to deduct the loss on your income tax return. For information on casualty and theft losses (business and nonbusiness), see Publication 547.

Casualty. Damage to, destruction of, or loss of property is a casualty if it results from an identifiable event that is sudden, unexpected, or unusual.

Theft. The unlawful taking and removing of your money or property with the intent to deprive you of it is a theft.

Gain from casualty or theft. When you have a casualty to, or theft of, your property and you receive money, including insurance, that is more than your adjusted basis in the property, you generally must report the gain. However, under certain circumstances, you may defer paying tax by choosing to postpone reporting the gain. To do this, you must generally buy replacement property within 2 years after the close of the first tax year in which any part of your gain is realized. The cost of the replacement property must be equal to or more than the net insurance or other payment you received. For more information, see Publication 547.

How to report. If you had a casualty or theft that involved property used in your rental activity, you figure the net gain or loss in Section B of Form 4684, Casualties and Thefts. Also, you may have to report the net gain or loss from Form 4684 on Form 4797, Sales of Business Property. (Follow the instructions for Form 4684.)

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