Reporting casualty loss with replacement asset in ProConnect Tax

This article will help you report a total-loss casualty for a business asset when insurance is used to purchase a replacement asset.

If the casualty was for personal property and occurred in a federally declared disaster area:

• Any gain on insurance or other reimbursement may be nontaxable if the replacement asset was purchased within the specified replacement period.

If the casualty was for business or income-producing property that occurred within a federally declared disaster area:

• The gain on any insurance or other reimbursement may be nontaxable if a replacement asset was purchased within the specific replacement period.

If the casualty was for business or income-producing property that occurred outside a federally declared disaster area:

• Any gain on insurance or other reimbursement, regardless of whether a replacement asset was purchased within a two-year period, is still taxable.

For additional information, reference IRS Pub. 547.

Follow these steps to enter a casualty or theft on the Depreciation screen:

1. Go to the Input Return tab.
2. From the left of the screen, select Deductions and choose Depreciation.
3. Click the blue Details button to expand the input screen.
4. From the top of the screen, select Disposition.
5. Locate the Casualty or Theft (4684) section.
6. Enter the following fields:
   • Description (fire, robbery, etc.)
   • Blank=trade or business, 1=income producing
   • Fair market value before casualty or theft
   • Fair market value after casualty or theft
   • Insurance or other reimbursement
   • For multiple personal casualty events, enter additional casualty number (ie. 2=2nd, 3=3rd)
     • Leave this field blank for the first casualty.
     • ProConnect Tax uses this entry to calculate Form 4684, lines 1-12 for each casualty.
7. This will flow to Form 4684 Section B - Business and Income-Producing Property

Follow these steps to enter a casualty or theft on the Dispositions screen:

1. Go to the Input Return tab.
2. From the left of the screen, select Income and choose Dispositions (Sch D, etc.).
3. Select Schedule D/4797/etc.
4. Click the blue Details button to expand the input screen.
5. Under the Dispositions (Schedule D, 4797, etc.) section, enter the following fields:
   • Description of property
   • Date acquired (negative date=various)
   • Date sold (negative date=various)
     • This will be the date the casualty or theft occurred on.
   • Cost or other basis (do not reduce by depreciation)
6. From the top of the screen, select 4684, 6781, 8824, 4255.
7. Locate the Casualties and Thefts (4684) section.
8. Enter the following fields:
   • Description (fire, robbery, etc.)
   • 1=personal, 2=business, 3=income, 4=employee
     • This controls which section of the Form 4684 that the casualty or theft will flow to
   • Fair market value before casualty or theft
   • Fair market value after casualty or theft
   • Insurance or other reimbursement
   • For multiple personal casualty events, enter additional casualty number (ie. 2=2nd, 3=3rd)
     • Leave this field blank for the first casualty.
     • ProConnect Tax uses this entry to calculate Form 4684, lines 1–12 for each casualty.