Casualty Loss - Market Value

[MAJ]

I'm basing my information in part on this:
In general, the amount of casualty loss you can deduct is equal to the fair market value of your property immediately before the casualty, reduced by the fair market value after the casualty – minus whatever you received as compensation from the insurance company. So, say your home was worth $300,000 before Ian and only $280,000 afterwards, and the insurance company gives you $15,000 – your possible casualty loss is the difference, $5,000.

In our Actual case. My client was selling their primary home in Ft Myers Fl for 739,000.00 - They were to close 2 days after the storm. Obviously, that never happened. New Florida law says if the damage is greater than 1.5% of the value; the seller or buyer can walk. They did.

Damages repaired; Insurance reimbursed.
House now sold for $630,000.00.

Loss:
Fair Market before (They had a contract) - $739,000.00
Fair Market After & Current - $630,000.00
Loss before Insurance $109,000.00
Insurance Reimbursement -$15,000.00
Loss: $94,000 - $100 = $93,000.00

I've never completed a loss based on market value. - So just wanted to triple check.

[TaxGuyBill]

I have no experience with this, but my first question would be if there was damage/loss of $109,000, why did insurance only pay $15,000?

Casualty losses also factors in Basis. I can never remember how it is factored in, but you would need to look at the 4684 to see how that works.

[sandigi]

You need one more step. You also have to look at the adjusted basis in the property before the loss. See TTB 4-24
1. Determine the Adjusted basis in the property before the loss
2. Determine the decease in FMV as a result of the casualty in your case $109.000
3. From the smaller of the amounts determined in 1 & 2, subtract any insurance or other reimbursement received or expected to be received

Another consideration is, will the IRS declare Ian a Qualified Disaster? I don't know how that happens, but I remember Hurricane Irma was a "qualified disaster" and that means you don't have to itemize and your loss gets special deduction treatment. Your loss is decreased by $500 instead of the $100 and 10% of AGI for federal disaster that goes on Schedule A. I think Irma was declared "Qualified" after the filing season opened. If I remember correctly, I waited til the final rules came out before I filed 2017 tax returns for people who had a casualty loss.

[MAJ]

At least my math error went undetected. 94,000 - $100 = $93,000 -- Good job Jones..