AP
Level 1
12-07-2019
01:13 AM
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
The taxpayer had and insurance policy that covered up to $431,900 for personal belongings. They opted not to itemize and take the 80%, which is $345,520. Now they want to claim a loss for the difference ($86,380) in their 2018 return. Per client, their cost basis is estimated to be $450,000.
Best Answer Click here
Labels
George4Tacks
Level 15
12-07-2019
01:13 AM
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
I don't have a citation, but IRS does not play second fiddle. If the taxpayer elects to take a reduced settlement with the insurance, IRS considers that a full reimbursement. I will put a shout out for someone that might be able to back me up with a citation.
Here's wishing you many Happy Returns
George4Tacks
Level 15
12-07-2019
01:13 AM
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
@TaxGuyBill can you confirm? You seemed to know about CA EITC, so how about this?
Here's wishing you many Happy Returns
Here's wishing you many Happy Returns
TaxGuyBill
Level 15
12-07-2019
01:13 AM
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
I agree with you. Although this link doesn't directly state that for a situation of 'electing' to only take part of the payment, I think it does show the concept that the tax deduction is for what the insurance won't cover.
https://www.irs.gov/publications/p547#en_US_2018_publink1000225265
As a side note, what does "opted not to itemize and take the 80%" mean? To me, that means that $431,900 is not a proven amount, and if it was a proven amount, WHY ON EARTH would the taxpayer choose to not take $86,380 just to save some paperwork? That seems REALLY fishy to me, and likely means the REAL amount is closer to the $350,000 mark.
https://www.irs.gov/publications/p547#en_US_2018_publink1000225265
As a side note, what does "opted not to itemize and take the 80%" mean? To me, that means that $431,900 is not a proven amount, and if it was a proven amount, WHY ON EARTH would the taxpayer choose to not take $86,380 just to save some paperwork? That seems REALLY fishy to me, and likely means the REAL amount is closer to the $350,000 mark.
itonewbie
Level 15
12-07-2019
01:13 AM
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
Agree that the claim is based on what insurance won't cover whether or not the taxpayer submits a claim in full, in part, or not at all. It is very clearly stated on both the F.4684 itself and the instructions.
---------------------------------------------------------------------------------
Still an AllStar
Still an AllStar