Hurricanes and tax........

[JON]

Pensacola, Fla a year ago they got hit. My client made USA Today, AOL and the Aug, 05 National Geographic-that is his pick-up truck in his swimming pool. We have already booked the loss and carried it back so that is not a question-the loss was basicly the non listed property. The lawsuit for recovery of insurance was based on the numbers supplied by the attorneys hired for the class action suit-which should be settled he thinks in another two to three years. The attorneys have hired tax experts to talk to all who are part of the suit and they have explained some facts that may impact my client.. Help needed on the following:

1. He lived in the house for November '03 to the hurricane in Sept "04.
He sold his MN residence in '03. He has been told he quailfies to take
the sales of residence under Sec 121-becaused of the disaster-is an
exception...??????

2. He has already purchased another house in Pensacola, because to
rebuild is going to take two to three years to get a contractor. His current
house has increased in value big time also.

He can sell the lot (#1-house is gone) for about $650,000. He hopes to evenutally get about $350,000 for insurance reimbursement on the house. He paid $375,000 for it. Does it qualify for special disaster? What is his basis for computing the gain for 121.

The client may have had selective listening, but he thinks the provision for 121 on #1 does not restart the two years for House #2. Why is that important-he would like to sell #2 as soon as possible and get out of Fla-getting the $500,000 twice if needed???

Lot out Snagle he is thinking about TN. No income taxes and hurricanes-right.

Thank you for any help.

[Snaggletooth]

Welcome to Tennessee

Jon, your guy needs to move somewhere there is no hurricanes and no income tax. If he wants to know anything about TN, give him my e-mail -- I'm pretty well familiar with every part of my state.

Also, no tornadoes, no crooked politicians, and no low-class people. Just hard-working people like me with well-kept automobiles and manicured lawns.

Even had a small earthquake a couple weeks ago.

Seriously, I can give him objective information about any part of the state. He won't get it from the chamber of commerce or real estate agents...

[Black Bart]

Welcome to Arkansas

Hold on a minute, Jon! Never take the first offer. With all due respect to my dentally-challenged comrade, it is my contention that the state "flower of the south" may be Arkansas rather than, ahem, Tennessee. We too have no hurricanes (I won't commit myself about his other claimed attributes) and our double-wides are most reasonably priced. Why, for the amount you mentioned--what was it you said (about a million)? For such an amount you could buy (well, I can't count that high, but it's so many that you and all your kin couldn't possibly live in all of them if you live to be a hundred). You could just stay in one 'til it was time to sweep and then move. Also (an inside tip), most dealers will give you a free box of engraved chrome toothpicks, a gun rack for your drowned truck, and a case of Miller Lite. For a volume buyer such as you'd be, wouldn't hurt to ask the dealer if he'd throw in his ' 74 Ford F-150.

If you can come up with another four million, the town of Dogpatch is on sale for five.

[JON]

Reply to myself-HELP

No one has run into this??????? I did not edit on word-but he may not move unless someone else helps him out of FL-with good tax advice.

[Snaggletooth]

Help? Are you kidding?

Jon, did you really think you were going to get an intelligent answer out of the likes of myself or my neighbor in Arkansas? On this board, we're bad sometimes about not answering the question, and I guess I'm the world's worst.

I might have offered help if I knew enough to be anything but dangerous on that subject.

Jon deserves better. Someone help him, PLEASE!!......

[Bees Knees]

1. He lived in the house for November '03 to the hurricane in Sept "04. He sold his MN residence in '03. He has been told he quailfies to take the sales of residence under Sec 121-becaused of the disaster-is an exception...??????

Yes, this is true, but it is under the reduced exclusion rules as an unforeseen circumstance [Reg. Sec. 1.121-3(e)]. A natural disaster qualifies for a sale due to unforeseen circumstances. So he would get 10/24ths of his $250,000 or $500,000 exclusion on the sale.

He can sell the lot (#1-house is gone) for about $650,000. He hopes to evenutally get about $350,000 for insurance reimbursement on the house. He paid $375,000 for it. Does it qualify for special disaster? What is his basis for computing the gain for 121.

Gain is $650,000 + $350,000 - $375,000 = $625,000. Of that amount $208,333 can be excluded under reduced exclusion rules if he is MFJ, or $104,167 if he is Single.

The client may have had selective listening, but he thinks the provision for 121 on #1 does not restart the two years for House #2. Why is that important-he would like to sell #2 as soon as possible and get out of Fla-getting the $500,000 twice if needed???

Well, I don’t know what he means by that, but the exclusion is allowed only once every 2 years, unless the second sale would also qualify for the reduced exclusion rules as an unforeseen circumstance. Maybe another Hurricane can help him out there.

[dyne]

New Katrina tax bill

The President just signed into law provision to provide relief for victims of Katrinia.
This includes allowing a casualty loss to be claimed without the $100 floor or the
10% AGI reduction.
A credit is allowed of $500 for people who house Katrina victims for 60 days or more
up to a maximum of $2,000.
The 50% AGI limit on charitable contributions is eliminated between August 27 and
December 31, 2005. This is just some of the provisions of the new law.

[JON]

Thank You

Thank you all. Bees if you want a free lunch sometime let me know.

[Brad Imsdahl]

The President just signed into law provision to provide relief for victims of Katrinia.
This includes allowing a casualty loss to be claimed without the $100 floor or the
10% AGI reduction.
A credit is allowed of $500 for people who house Katrina victims for 60 days or more
up to a maximum of $2,000.
The 50% AGI limit on charitable contributions is eliminated between August 27 and
December 31, 2005. This is just some of the provisions of the new law.

We posted our coverage of the bill last night on our updates page.

See http://www.thetaxbook.com/updates_view.asp?ID=19