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February 2008 Casualty Losses - Business and
Individual When Hancock County became a presidentially declared disaster area in August, 2007, many businesses and individuals suffered all types of losses, with the loss of property being considered a casualty loss. A casualty loss is defined as a loss from an identifiable event of a sudden, unexpected or unusual nature. A casualty loss can occur at any time, any where, and not just in presidentially declared disaster areas. In some cases, casualty losses can create taxable income which creates the need for accurate recordkeeping. The rules can be confusing, but for businesses and individuals, the information needed in order to perform the casualty loss calculation is similar. The information needed consists of the following: 1) A
list of each item lost, its cost, and its fair market value before and after the
casualty loss. The 2) Amounts received from insurance claims, government or local agencies and other sources. For businesses, the loss is the lesser of the adjusted basis (cost minus depreciation) or the decline in fair market value minus any amounts received from insurance, government or local programs. If items are fully depreciated, a gain could easily occur. For individuals, the loss is the lesser of your cost (no depreciation) or decline in the fair market value minus any amounts received from insurance, government or local programs. This amount is then reduced by $100 and then further reduced by 10% of your adjusted gross income. The above only discusses the basics of casualty losses. As always, we are here to help, so please call us if you have questions and we will be glad to discuss your situation in more detail.
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