FEMA money and basis

[kpangelinan]

House was completely destroyed by floods this year. The client didn't have flood insurance as their area wasn't deemed a flood plain. So, they should be able to claim a casualty loss on Schedule A.

My question is, does the money given to them from FEMA count towards basis when determining what the loss? I do know that insurance reimbursements do.

Thanks for any help.

[JG EA]

Found this: FEMA is a grant program, so the funds do not have to be repaid or declared as income_

And from 4684:
"Grants, gifts, and other payments. Grants and other payments you receive to help you after a casualty are considered reimbursements only if they must be used specifically to repair or replace your property. Such payments will reduce your casualty loss deduction. If there are no conditions on how you have to use the money you receive, it is not a reimbursement. "

[S T]

Found this IRS Article as well that might assist you

http://www.irs.gov/businesses/small/article/0,,id=171197,00.html

Sandy

[kpangelinan]

Found this: FEMA is a grant program, so the funds do not have to be repaid or declared as income_

And from 4684:
"Grants, gifts, and other payments. Grants and other payments you receive to help you after a casualty are considered reimbursements only if they must be used specifically to repair or replace your property. Such payments will reduce your casualty loss deduction. If there are no conditions on how you have to use the money you receive, it is not a reimbursement. "

Thank you!!!

Found this IRS Article as well that might assist you

http://www.irs.gov/businesses/small/article/0,,id=171197,00.html

Sandy

Thank you!!!

This has been incredibly helpful!!!