Fear of Filing

[BHoffman]

Have a return here where the client's vacation cabin burned to the ground. They are showing basis of $490k, and have adequate substantiation. FMV after the event is $50k for the land, substantiated by comparable sales.

They received insurance reimbursement for the real estate in the amount of $200K.

They lost contents valued at $135k, also substantiated. They received insurance reimbursement for $89k.

For some weird reason, I am frankly afraid to finalize this return because I'm afraid of the numbers and afraid of an audit. And I'm afraid I'm missing something or doing something wrong, although form 4684 isn't exactly hard to fill out for pete's sake. Everything looks fine on Sch A and elsewhere. I just have this creepy feeling...

I'll review the return AGAIN to make sure.

Call me a scaredy cat. Go ahead. Do it. Make my day.

[Larmil]

Have a return here where the client's vacation cabin burned to the ground. They are showing basis of $490k, and have adequate substantiation. FMV after the event is $50k for the land, substantiated by comparable sales.

They received insurance reimbursement for the real estate in the amount of $200K.

They lost contents valued at $135k, also substantiated. They received insurance reimbursement for $89k.

For some weird reason, I am frankly afraid to finalize this return because I'm afraid of the numbers and afraid of an audit. And I'm afraid I'm missing something or doing something wrong, although form 4684 isn't exactly hard to fill out for pete's sake. Everything looks fine on Sch A and elsewhere. I just have this creepy feeling...

I'll review the return AGAIN to make sure.

Call me a scaredy cat. Go ahead. Do it. Make my day.

I wait a few days before I review those kinds of returns. Maybe you will see something that you do not see now.

[JCH]

It sounds like you have everything lined up right. (Sorry, I know this wasn't the answer you wanted to hear.) I guess the question that jumps off the page for me is why they were so under insured? Normally you never see the casualty loss thing come into play because insurance covers most if not all of the loss. I agree with you though, this one will be audited. But what's to fear if you have all the supporting documentation?

[Nashville]

HAS to be Large

Keep in mind that in order for ANY 4684 to be filed the numbers HAVE to be large and the situation extraordinary.

If we must stay in our comfort zone where losses are not large, and insurance reimbursements are adequate, the 4684 is not likely to do anyone any good.

I would proceed and ask the question that should arise: If the loss was substantiated why did the insurance cover so little? If it was because of policy limits, or co-insurance, then you already have a good answer.

Remember, paperwork from the insurance company that does not reduce the amount of loss is excellent third party substantiation. Not only that, but it is from a source whose objective goes in the opposite direction from yours, so it also survives the bias argument.

I would not be afraid unless I read some of the paperwork from the insurance company that takes issue with the amount the client claims to have lost.

[Zee]

$135,000 in contents for the cabin sounds kinda high, but you've indicated it can be substantiated. If you're comfortable with the numbers, I wouldn't lose any sleep over filing the return. I'd simply caution the client that it's possible they casualty loss will be questioned and they will be required to substantiate everything.

[BHoffman]

Insurance docs state $251k over limit.

I sure don't want to deal with an audit, although I turn those over to someone else to represent the client. He is retired IRS and has done a great job on the few clients I've had to refer to him.

Thanks for your support. Have no idea why I'm feeling so spooked about this. Could have something to do with the fact that I'm completely exhausted

[ChEAr$]

Basis

Insurance docs state $251k over limit.

I sure don't want to deal with an audit, although I turn those over to someone else to represent the client. He is retired IRS and has done a great job on the few clients I've had to refer to him.

Thanks for your support. Have no idea why I'm feeling so spooked about this. Could have something to do with the fact that I'm completely exhausted

maybe the spooky feeling relates to what you originally said, namely that clients are
"SHOWING basis of...."

Reminds me of fellow who said he wanted to SHOW a loss for the year, so he wouldn't
have to pay tax. To SHOW a loss, figure, something like that, just sort of sounds
made up to me. Of course maybe it's not. But it just struck me funny.
Long day.

[DaveO]

The first 4684 I ever did was for a young lady who had a classic automobile destroyed in a fire (arson). She had photos of the car before and after, copies of the invoices, a newspaper clipping, a police report and an apprasial, sadly no insurance.

That's been 10 years ago and haven't heard a peep from the service.

[Gretel]

Insurance docs state $251k over limit.

I sure don't want to deal with an audit, although I turn those over to someone else to represent the client. He is retired IRS and has done a great job on the few clients I've had to refer to him.

Thanks for your support. Have no idea why I'm feeling so spooked about this. Could have something to do with the fact that I'm completely exhausted

I concur with the earlier expressed opinion to wait a few days. I always regretted it when I haven't listen to that type of feeling. Something might pop up in the middle of the night. If not then everything is probably OK.

[BHoffman]

That is good advice, and I'm going to take it. Tomorrow will be a different day, and I'll get to this first thing AM

Thanks so much.