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Casualty Loss Safe Harbor - change to actual repairs?

Technical topics regarding tax preparation.
#1
kathyt  
Posts:
397
Joined:
21-Apr-2014 7:42am
Location:
Lake Charles, LA
In 2020 Client had a casualty loss from Hurricane Laura - we used the insurance safe harbor which is basically the deductible and the non-recoverable depreciation. Loss was about 11k. We took the 11k loss on the tax return - the repairs were not finished but taxpayer was confident that insurance would pay everything except the deducible & non-recoverable depreciation.

In the year 2021 taxpayer finished the repairs and in the end, they ended up having to spend about 20k more than what insurance paid.

So I'm a little confused on how to handle this - do I amend the 2020 return to change the loss from 11k to 20k; not using the safe harbor but the the actual repairs made as the measure of the decrease in FMV?

Or do I just take the difference - the 9k as a loss on the 21 return with an explanation that we are not using the safe harbor but the actual expenses?
 

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