Hi fellow tax preparers, In 2016, client in Big Sur, CA, lost most of the farm first to fire, then the floods came and destroyed what was left. I've not dealt with disaster losses before. IRS info says farmer can "ELECT" to report disaster on amended previous year tax return (2015). Does this mean farmer CAN deduct losses on 2016 return - which has not been filed? This is a small farm and not much was owed in 2015. The fire destroyed farmer's records. I always keep copies of documents client's bring me. I don't have 2016~~! How does farmer handle loss of records? Also any other information you may have about farm disasters that you are willing to pass on to me would be appreciated. Thanks one and all for assisting me with this situation~~!
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What exactly did his lose?Originally posted by rmcgrobi View Post
Did any insurance reimburse him?
Chris -
Return to 2015
I didn't think there was an "election" available. I think the reporting has to be done in the year of occurrence in order to keep taxpayers from shifting income/deductions into a year of their choosing to minimize taxes. You suggest there may be multiple events, and if so, that could lead to reporting a casualty in multiple consecutive years. The 10% floor has to be applied to each event, not the total.
If you have decent records from 2015 for depreciable equipment, that is a good start for 2016. The taxpayer needs to contact the bank and get records. In most cases that should be the backbone of 2016 records but will not provide "cash" transactions. He'll probably have to pay the bank a fee, and it would be probably cheaper for the bank to provide this in an electronic format.Last edited by Golden Rocket; 05-22-2017, 02:53 PM.Comment
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Similar incident
RMC,
We had a client with the same loss (same area). Turned out the loss is the change in the value of the property. Client checked with the property tax assessors office and found since there was no recorded improvements to the property, the loss was minimal, even though he now owns a burned out waste land.
Suggest you do a quick w/county assessor before you spend much time on this one.Comment
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Chris - in reply to your ?s about farmer
Hi Chris, The farmer lost everything: he made cheese, honey and olives. He lost all the farm buildings, the trees and the bee hives. I believe he was able to save the goats (cheese) and the bees probably took off. I still have to find out about any insurance or FEMA $$ he may have received. I'm wanting to be more informed about how to handle the reporting of his losses. Thanks for your assistance.Comment
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Originally posted by rmcgrobi View Post
I would start with his year end inventory, get bank statements for 2016. He should have had insurance on the buildings and deprecating them as well for your cost. Trees should have a cost? Purchase price? Did he buy the land with the trees on them? What would the property been worth without the trees?
ChrisLast edited by spanel; 05-23-2017, 08:26 AM.Comment
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How can you take a loss on the value of the property if the client has not sold it?Originally posted by mactoolsix View Post
N/M. You can. Again I would be careful if its just land that was destroyed.
Also you would not believe what a burned property will be like in a few years. Sometimes its better than it was...
ChrisLast edited by spanel; 05-23-2017, 08:23 AM.Comment
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