[StBernard] Calculating fair market values for casualty losses

[Westley Annis]

Dan,

Perhaps you might want to explain to folks, though not a quick or easy task,
what they need to consider to see if they have enough "market loss" on their
homes to write off on their federal income taxes.

Thanks as always,
John Scurich
La. Certified Real Estate Appraiser
985-882-9421 / 504-722-6662


----- Original Message -----

> I had received correspondence from a CPA collegue in Metairie that 

> through

a

> phone conversation with an IRS representative that IRS planned to 

> initiate audits for the Katrina losses effective immediately for any 

> return that represented a tax benefit of $10,000 or greater.  Within a 

> week three of

my

> clients were contacted for audit reviews.  Fortunately these clients, 

> like nearly all of my clients, had specific detail of the losses 

> incurred to support the numbers represented on the tax return.  

> Undoubtedly these reviews will go unchallenged.  I call this to your 

> attention to be sure

that

> you have the losses documented using the casualty loss guide that IRS 

> had initially passed around just after the storm. This will greatly 

> minimize your anxiety should an examiner appear at your doorstep, 

> literally.  My feeling is that since the losses are greatly widespread 

> to a magnitude

quite

> unlike IRS has ever seen that some might take unfair advantage of the 

> casualty to use to their advantage maybe thinking that IRS will never 

> get

to

> all of these returns in our lifetime.  Then it occured to me that 

> possibly IRS is hiring the laid off SBA and FEMA warm bodies to run 

> interference

for

> them to visit the filers with tremendous tax benefits to see if 

> anything glaring comes to their attention to warrant further 

> investigation.  I am supposing here, mind you.  But it is so much 

> better to be cautious at this sensitive time.

>

> Initially IRS advised that to calculate the fair market values on your 

> personal property was to use the original cost and depreciate each 

> year of ownership by 5% assuming 2005 acquistions were 100% of the 

> original cost values and 2004 acquisitions were at 95% of the original 

> cost values, so forth and so on until you got to 50% and go no lower.  

> However, two weeks ago, the IRS advised another "safe harbor" method 

> that would never be challenged by the IRS and that was to take the 

> "replacement values" of the lost items and depreciate by 10% per year 

> until you go to 50% and go no lower.  For example a sofa that cost 

> $800 3 years ago under the earlier

IRS

> advised method would be valued for fair market purposes at $680 ($800 

> X 85%).  Safe Harbor methods would be to take that same sofa today 

> that

might

> cost $1,000 replacement value to $700 (1,000 X 70%).  Not much 

> different

but

> the amounts might start to add up.in your favor.  Between the two 

> methods you should be safe.  "There are other safe harbors" concerning 

> your real property that I will not into right now.  I believe I gave 

> enough information to spin most heads for now including my own for all 

> that we

have

> experienced.

>

> Dan

>

>

> Dan Johnson

> Certified Public Accountant

> 257 W Causeway Approach

> Mandeville, LA  70448

> 985-626-1102  Voice

> 985-727-0834  Fax