This form has two parts, Section A and Section B, that are computed independently of one another.
Use Section A for losses of personal use property (including real estate).
Use Section B for losses of business or investment property.
If you have a loss from a casualty, the form calculates the decrease in market value from the casualty on line 7A. You may deduct this amount, but not more than the cost of the item (see line 2A ). Also, you may not take a deduction for any amount you received from insurance (see line 3A).
If the loss was personal (as opposed to a business loss), Section A applies this limit: you may deduct only losses in excess of $500 per casualty plus 10% of your adjusted gross income (see Section A, lines 10- 22).
If the amount of insurance you received exceeds the cost of an item, you have a gain on that item. If your gains exceed your losses, you should report the gain on Schedule D. This gain should be manually carried to Schedule D.
Enter the part of Section A, line 4 that is from properties held short term on Schedule D, Part I.
Enter the part of Section A, line 4 that is from properties held long term on Schedule D, Part II.
If the loss is personal, you may fill out lines 1-12 on each copy of Section A of Schedule 4684. You may report up to four items on each schedule. Totals are automatically carried to copy 1, and the remaining computations for Section A are done automatically.
If you're using second and higher copies of this form to report the 5th, 6th, etc., items from a single casualty or theft of personal-use property, then OVERRIDE line 12 on the copies after the first copy, adding back the amount on line 11.
The $500 limitation (line 11) applies only once for each casualty or theft.
Note:If you use more than one copy of Form 4684, we'll automatically total the results on lines 13 through 22 of Copy 1. Lines 13 through 22 will remain blank on all other copies.
If you lost multiple business or investment properties in a single casualty or theft, you may fill out lines 23-32 on each copy of Section B of Form 4684. You may report up to four items on each copy.
You must then categorize the line 26 and line 32 amounts, and manually carry each amount either to line 33 or line 38 of copy 1 of Section B.
Each item must be categorized as either investment property or business property, and
Carried to the column indicated on line 33 (for short term property) or 38 (for long term property).
If you experienced two or more casualties or thefts in 2010, start a new copy of Form 4684 for each new casualty.
Note:If you start with a second casualty event on (for example) copy 5, don't override line 10 on Copy 5. But if this second casualty continues onto Copy 6, then OVERRIDE line 10 again on Copies 6 and higher.
If line 9 would be negative because the insurance you received exceeded the decline in fair market value, we treat line 9 as zero. This is also consistent with a reasonable interpretation of the tax regulations.
Note:There is another reasonable interpretation, however. That would be to allow line 9 to be negative, and apply this negative number against positive numbers in other columns. If this situation applies to you, you may wish to consult a tax adviser. To find out how you can talk to an H&R Block tax professional, click the Ask a Tax Advisor button.
If you use Section B, you should also manually carry the amount from Section B, lines 26 and 32 to line(s) 33 and 38, depending on your holding period and the use of the property.
Carry to Section B line 33 that part of the line 32 amount that is from property you held short term (one year or less).
Carry to line 38 that part of the line 32 amount that is from property you held long term (more than one year).
This Section B, Part II carry must be manual because you must classify the items into groups depending on how long you held each one, and whether each was a business versus an income-producing property.
Note:If you have multiple casualties, or more than 4 properties from a single casualty, you should manually total and carry the numbers from the other copies to Section B, Part II of Copy 1. Part II is filled out only for Copy 1.
If you have recapture income with respect to property in the casualty or theft, fill in Form 4797 Part III for that property. The amount from 4797 will be carried automatically to line 37.
Note:You may have recapture income if the property had been depreciated, and the casualty or theft resulted in a recovery of more than the property's adjusted basis.
Casualty loss-personal carries from Section A, line 22 to Schedule A line 20.
Business losses carry from Section B, lines 36 and 42b to Schedule A, line 23 or line 28.