Personal Property Casualty Loss

[TXEA]

Going to try this post one more time.

Taxpayers house destroyed by fire. The insurance proceeds for the home were greater than adjusted basis, so there is a gain. Taxpayer spent well more than insurance proceeds and will avoid taxable gain.

TP received 100,000 for personal property destroyed by fire. Would you report item by item on the Form 4684 for the personal property insurance proceeds? No idea of the basis of most items. Although, the courts have allowed "meaningful and reasonable estimates" in these circumstances.

Note, TP not trying to get a loss from the personal property insurance proceeds. I am just trying to determine if this all needs filled out item by item on Form 4684 to document no gain from the personal property insurance proceeds.

I will have to report the house transaction since there was a gain and replacement property was acquired. Not sure if it would pique the interest in review if no personal property was scheduled.

[Maribeth]

The last personal property casualty loss I had was for a client that had been burglarized. The insurance company had the client complete an inventory of the items taken/damaged. Then the insurance company assigned the amount they were paying on each item.

There must be something comparable that you have for your client. Could you not just create a pdf of the inventory and attach it to the return. Notate on the form to "see attached"?

[TXEA]

We have a 25 page spreadsheet that documents the items included in the personal property insurance proceeds.

My issue is this.....Who can possibly substantiate basis on 500+items of personal property so as to establish that there is no gain on the insurance proceeds for the personal property? The Tax Court has established that meaningful and reasonable estimates are allowed in determining whether there was gain or loss on the insurance proceeds (by item).

I have no doubt this couple has no gain on personal property...... just wondering if I need them to document that to me in some way or the other.

This is a no win situation for the tax preparer. Put the clients to work documenting no gain, so I can sign the return with reasonable basis and the clients are annoyed. Ignore it all together and risk a paid preparer penalty.

BTW - I called the practitioner priority line. They said no reporting is required if no loss is claimed (which I knew). However, I had to make certain (note the word certain) there was no gain.