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Business & Tech

IMPORTANT POST-SANDY RECOVERY INFORMATION

Mindy F. Wolfle, Neighbor

This information is provided as a public service by Armao, Costa & Ricciardi, CPAs, P.C., located at 1055 Franklin Avenue, Garden City.

Now that the recent devastating storms are over, everyone is surveying the damage done to their property and wondering: "How am I supposed to handle this?

Current tax laws allow a deduction for losses of business and non-business property due to a casualty — a sudden, unexpected, and unusual event such as a fire, storm, flood, or hurricane — for which you likely qualify. Please see the information provided by the Internal Revenue Service included with this letter. While you bear the burden of proving the existence of the casualty as the cause of the loss, the professionals at Armao, Costa & Ricciardi can be of assistance. If you've never suffered a property loss, establishing the facts needed to qualify for the deduction — including the resulting decline in fair market value, the adjusted basis of the asset, and the mere fact of ownership — and calculating the amount of the casualty loss deduction can be pretty intimidating. We welcome the opportunity to meet with you to evaluate your personal situation. Please contact us at 516.256.3200 to set up a consultation where we can discuss your needs and how we can help you.

What to do if your business was damaged Business loans are available to people who have suffered damage to business property or economic injury. These low-interest loans are available through the Small Business Administration (SBA) to repair or replace damaged property not covered by insurance, and to provide working capital. Please visit www.sba.gov for detailed information. You can also obtain information at the FEMA Disaster Recovery Center (DRC) by visiting www.fema.gov or calling 1-800-621-FEMA. Some of the services may include:  Guidance regarding disaster recovery  Clarification of any written correspondence received  Housing assistance and rental resource information  Answers to questions, resolution to problems and referrals to agencies that may provide further assistance  Status of applications being processed by FEMA  SBA program information If you have any questions regarding matters we are handling for you, or if you wish to discuss any other financial issues that have resulted from Super Storm Sandy, please let us know.
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From the IRS: Casualty, Disaster, and Theft Losses (Including Federally Declared Disaster Areas)

Generally you may deduct casualty and theft losses relating to your home, household items and vehicles on your Federal income tax return. You may not deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement, and you must reduce the loss by the amount of any reimbursement. A casualty loss can result from the damage, destruction or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption. A casualty does not include normal wear and tear or progressive deterioration. A theft is the taking and removing of money or property with the intent to deprive the owner of it. The taking must be illegal under the law of the state where it occurred and it must have been done with criminal intent. If your property is personal-use property or is not completely destroyed, the amount of your casualty or theft loss is the lesser of:

  • The adjusted basis of your property, or
  • The decrease in fair market value of your property as a result of the casualty or theft
If your property is business or income-producing property, such as rental property, and is completely destroyed, and the fair market value of the property before the casualty is less than the adjusted basis of the property, then the amount of your loss is your adjusted basis. The loss, regardless of whether it is a casualty or theft loss, must be reduced by any salvage value and by any insurance or other reimbursement you receive or expect to receive. The adjusted basis of your property is usually your cost, increased or decreased by certain events such as improvements or depreciation. You may determine the decrease in fair market value by appraisal, or if certain conditions are met, by the cost of repairing the property. Individuals are required to claim their casualty and theft losses as an itemized deduction on Form 1040, Schedule A (PDF) (or Form 1040NR, Schedule A, if you are a nonresident alien). For property held by you for personal use, once you have subtracted any salvage value and any insurance or other reimbursement, you must subtract $100 from each casualty or theft event that occurred during the year. Then add up all those amounts and subtract 10% of your adjusted gross income from that total to calculate your allowable casualty and theft losses for the year. Casualty and theft losses are reported on Form 4684 (PDF), Casualties and Thefts. Section A is used for personal-use property, and Section B is used for business or income-producing property. Casualty losses are generally deductible in the year the casualty occurred. However, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to treat the loss as having occurred in the year immediately preceding the tax year in which the disaster happened, and you can deduct the loss on your return or amended return for that preceding tax year. Theft losses are generally deductible in the year you discover the property was stolen or destroyed unless you have a reasonable prospect of recovery through a claim for reimbursement. In that case, no deduction is available until the taxable year in which it can be determined with reasonable certainty whether or not such reimbursement will be received. If your loss deduction is more than your income, you may have a net operating loss. You do not have to be in business to have a net operating loss from a casualty.

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