Fire-land restoration costs

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  • equinecpa
    Senior Member
    • Mar 2006
    • 578

    #1

    Fire-land restoration costs

    I have a farmer client whose land was burnt by wildfire last year. They paid out approximately $10,000 in dozer/clean-up work to stop erosion and clean up the land after the fire. This sounds like a casualty loss to me-but when I try to complete the 4684, I'm not sure if this fits. Can a casualty loss be claimed on land? It's definitely not worth as much as before the fire. My client is only seeking to claim the out-of-pocket clean-uo expenses, should this just be claimed on the Schedule F perhaps as maintenance?

    TIA

    Carolyn
  • TXEA
    Senior Member
    • Feb 2014
    • 329

    #2
    I think this is a casualty loss. There is a section of Pub 225 that addresses this issue (although not sure if it covers land).

    Pay particular attention to the section regarding restoration costs.

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    • JohnH
      Senior Member
      • Apr 2007
      • 5339

      #3
      I can't vouch for the reliability of this article, but it sure looks as though it's on point:



      You might have a combination of both casualty loss AND currently deductible business expenses for the cleanup/restoration work. (See middle of the second page).
      Last edited by JohnH; 06-25-2014, 11:57 AM.
      "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

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      • equinecpa
        Senior Member
        • Mar 2006
        • 578

        #4
        Thanks-that link is helpful.

        Originally posted by JohnH
        I can't vouch for the reliability of this article, but it sure looks as though it's on point:



        You might have a combination of both casualty loss AND currently deductible business expenses for the cleanup/restoration work. (See middle of the second page).

        Comment

        • Nashville
          Senior Member
          • Nov 2007
          • 1129

          #5
          Timber Value

          Check the proceeds from the insurance and see if a portion of it is allocated to the value of timber lost. There had to be timber unless it was all pasture or desert.

          If so, I would report the sale of timber for that portion of the insurance proceeds. That will reduce the insurance proceeds which calculate the casualty loss, in fact it might just convert a gain into a loss.

          Depending on the numbers, the above strategy might hurt worse than it helps. Many people do not track basis in their timber, and if the 10% haircut messes up the loss, it might not work.
          Last edited by Nashville; 07-01-2014, 11:33 AM.

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