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Video instructions and help with filling out and completing Where Form 4797 Involuntary

Instructions and Help about Where Form 4797 Involuntary

This section is on involuntary conversions and casualty and theft losses involuntary conversions is when you had stop and now you don't and you did not voluntarily sell it so this would come either from destruction and my graphic there is floods or theft somebody came in and took your stuff or seizure the government took your land so that they could widen a road for example or threat of condemnation where the government tells you they are going to take your land when you have an involuntary conversion you may be reimbursed from an insurance company and you may be reimbursed for more than what you originally paid for stuff you may be reimbursed from a city if they're condemning land for example so it's possible that you would have a game from an involuntary conversion or a loss now if you have a game you have two choices you've got extra cash in and you can either keep the cash cash out of the whole situation or you can replace the stuff that you lost or was taken from you games on involuntary conversions are deferred to the extent that you buy or replace similar your property with similar property and there are some real technical rules on what's similar in realists day we're looking for other US real estate for personal property it also has to match the use that is if you had a car before you would have to replace it with another car now we're not so picky as to say that a Chevy has to be replaced with a Chevy and not afford but it has to be car for car for example replace that period is important and it must be no later than two years after the year of the game so that's three tax years and that goes to three years if what you have is condemned so if you're sitting in 2022 and something is condemned in the middle of 2022 then you have the rest of 14 all of 15 and 16 to replace the property unless it's a condemnation in which case you also have till the end of 17 to replace the property if you have a loss on an involuntary conversion you must take the loss but the gain you have the choice of paying the tax or deferring the game until you sell the replacement property now buuut plays a role in involuntary conversion and i and i have boots their boot is not like i'm property it's usually cash where you get cash or someone assumes your liability so if it were mortgage payable on a piece of land and somebody takes your land that also takes the mortgage that mortgage is not as an assumed liability now if you receive boot if you pay them we're not worried about you but if you receive you arguably have cash or something of value with which to pay a tax if there's a game so booth comes into play and food is dangerous if you have an involuntary conversion at a game and you were the one who received the boot not the one who paid the boot when that happens the game that you recognize is the lesser of a realized game or the boot received we're not going to tax you a more game than you had and we're not going to tax you on more boot than you've received now your basis in the boot that you receive is its fair market value if it's if it's cash that's real easy to figure out if it's not cash you may need an appraisal an assessment and the basis if you exchange properties the new property has something called a substitute basis and it's that substitute basis plus or minus any boot given plus or mud any gain or loss recognize that is if there's some kind of swap involved your basis in their new property is the amount that you're out of pocket for that property the holding period for good begins with exchange and lifetime property has a carryover holding period this will make more says in chapter 10 when we do like kind exchanges for now what do you need to know you need to know what the rules are on your on involuntary conversion on the last slide and you also need to know what good is and you also need to know you're in a precarious type situation if netboot is received because you could end up paying tax on a gain which would be the lesser tax on the lesser of the realized skinny or the boot received casualty losses I have my fire there because fire is a kind of casualty to be casually lost it has to be sudden and unexpected and generally unusual to you we're a lot more liberal than the extraordinary items that you saw in GAAP but if it's sudden and unexpected that it's potentially a casualty loss and it cannot be due to taxpayer negligence for example well in a domestic dispute mr. Blackman said his wife's clothes on on the stove and set them on fire which he thought he put the fire out but he didn't and the fire spreads to the rest of the house he he sets his wife's clothes on fire he thinks he puts the fire out he leaves in a huff fire wasn't out fire ends up burning down the house can he deducted casually loss for the house he only meant to destroy her clothes not the house and the answer is no it's not a casualty loss for him because he was negligent in putting clothes on fire in the middle of the house and not making sure they were out before he left theft losses that losses are deducted in the year that you discover you've been robbed they do not include lost items and all of this.

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