With the recent developments happening around the country, riots in urban areas have caused storefronts, office buildings and business properties to be destroyed.
As a result of these riots, some of these businesses have lost products due to theft, windows have been smashed, and some buildings were burned to the ground.
Businesses really felt this costly blow as they were just reopening from the Coronavirus pandemic.
A commercial insurance property policy should generally cover some, or all, of the losses. (You may also have a business interruption policy that covers losses for the time you need to close or limit hours due to rioting and vandalism.) But a business may also be able to claim casualty property loss or theft deductions on its tax return. Here’s how a loss is figured for tax purposes:
Your adjusted basis in the property
Any salvage value
Any insurance or other reimbursement you receive (or expect to receive).
Losses that qualify
A casualty is the damage, destruction or loss of property resulting from an identifiable event that is sudden, unexpected or unusual. It includes natural disasters, such as hurricanes and earthquakes, and man-made events, such as vandalism and terrorist attacks. It does not include events that are gradual or progressive, such as a drought.
For insurance and tax purposes, it’s important to have proof of losses. You’ll need to provide information including a description, the cost or adjusted basis as well as the fair market value before and after the casualty. It’s a good time to gather documentation of any losses including receipts, photos, videos, sales records and police reports.
However, the tax code imposes limits on casualty loss deductions for personal property that are not imposed on business property. Contact your Rudler, PSC advisor at 859-331-1717 to help address any questions or concerns you may have regarding rioting damage and if your business can benefit from a casualty loss.
RUDLER'S TAX MANAGEMENT & PLANNING TEAM
This week's Rudler Review is presented by Maddie Schweitzer, Senior Accountant and Melanie Smart, CPA.
If you would like to discuss your particular tax situation, contact Maddie or Melanie at 859-331-1717.
Rudler PSC has established a Tax Management and Planning Team, a group of professionals who specialize in tax services. These highly qualified and experienced tax specialists meet on a regular basis to discuss upcoming client engagements, current issues relating to our clients and regulatory changes. Be sure to receive future Rudler Reviews for advice from our tax experts, sign up today !