Business Casualty Losses

For partial business losses, the deductible amount of the loss is the value of the destroyed portion or the adjusted basis of the property, whichever is less, reduced by insurance or other compensation received.

For business property that is completely destroyed, the deductible amount of the loss is the adjusted basis of the property minus any salvage value and any insurance or other compensation received or recoverable.  This is the case whether or not the fair market value (FMV) of the business property immediately preceding the total casualty is less than the adjusted basis of the property.

Two methods may be used to determine the decline in FMV of property damaged in a casualty:

• Appraised value immediately before and immediately after the casualty to determine the amount of deductible loss.
• Cost of repairing the damaged property to set the amount of the loss.

The IRS has announced relief related to Hurricane Sally. In summary, the filing and payment due dates for various individual and business tax returns due on or after September 14, 2020 have been extended to January 15, 2021. Please note this does not include an extension to pay your 2019 tax liability, it only extends the time to timely file the tax return. The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. Currently this includes Baldwin, Escambia and Mobile counties in Alabama, but taxpayers in localities qualifying for individual assistance added later to the disaster area, elsewhere in the state and in neighboring states, will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov. The Alabama Department of Revenue is also offering similar relief. For more information, please go to the Alabama Department of Revenue Website.

If you have any questions, please call your accountant at CSB or our main office at 251-343-1012.