Casualty Loss Safe Harbor - change to actual repairs?
Posted: 2-May-2022 1:19pm
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?
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?