This article will address what you, the disaster victim, must do to
provide proof of loss. The first thing you
have to do is prepare a complete list of ALL your possessions. You can
and must do this even if you have not been able to return to your home
and/or place of business.
As a business owner, you are more likely to have an
inventory of all your assets than a homeowner. If you don’t have such an
inventory, use your prior years’ tax returns to see what items you have
claimed, what items you are depreciating, and what your end-of year
inventory was. Then start recreating the conditions in your business as
they were just before the disaster.
If you are starting from scratch, instead of using (or
in addition to ) a notebook and slips of paper … start a computerized
inventory NOW. This will allow you to document all your assets and add
new information as you go along. ( It is also a great way to keep an
immediate record of the items you are replacing, such as this new
computer). The best affordable business inventory product on the market
is LibertyStreet’s AssetManage Business; you may want to download a
trial version and see how you like it.
As you recreate your list of assets, include costs for
each item: the original purchase price or the basis of the property. To
complete this list, you must enter the fair market price of each
property “just before” the disaster.
You go through the same process for your home, i.e.
your personal possessions. In the same manner as for your business, you
complete a “just before” list of all your possessions (including
your home, your cars, your clothes, etc.).
You can use IRS
Publication 584 (Casualty, Disaster, and Theft Workbook for
Personal-Use Property) or obtain a copy from your local IRS office. Go
directly to page 3, where in Schedule 1 – Entrance Hall, you will find a
series of items that you may find in an average entrance hall; add to
this list as necessary. Move on from here to the other Schedules: Living
Room, Dining Room, Kitchen, Den, Bedrooms (1 schedule for each bedroom
please), Bathrooms (1 schedule for each bedroom please), Recreation
Room, Laundry and Basement, Garage, Sporting Equipment, Men’s Clothing
(list separately for each person), Women’s Clothing (list separately for
each person), Children’s Clothing (list separately for each child),
Jewelry (list separately for each person), Electrical Appliances,
Linens, Miscellaneous.
Whether for your business or your home, just trying to
remember and list all your assets is a major job…much of it must be done
from memory, but you have to actually track and substantiate the dollar
amounts for cost (or basis) and fair market value before the disaster.
The next step is to identify what is lost and what is
damaged. When you are allowed back home or back to your business
premises, you will be sorely tempted to just throw out all those
hopelessly damaged items.
DON’T DO THAT!!!!
Control yourself and plan ahead. Before you dump
anything by the roadside, before you fill those garbage bags, take a
whole lot of photographs. You don’t need a video camera, you don’t need
anything fancy…one of those small, cheap, throwaway cameras will do just
fine. Your ONLY purpose is to make a visual record of the conditions.
You kitchen has mud on the floor? Click.
The food is rotten in your refrigerator or freezer?
Click.
Your furniture is water logged and is filthy dirty?
Click.
Your clothes are in a heap of wet rags? Click.
Ok…you get the point. Take LOTS of pictures.
Take pictures of your home and/or business from the
outside…all sides.
Take pictures of your garden, your cars…what there is
left of them.
Take pictures!
These pictures (date stamped so there is no
possibility of tampering), with the additional information the IRS
requires are your proof of loss and will be extremely useful when you
are ready to submit a claim.
After you have taken all those pictures, you have to
repeat the valuation process for each and every item. You want to know
what the fair market value of each property is after the
disaster.
How badly are things damaged? Are they salvageable?
What are they worth in this condition? What is a total loss?
You are likely to need the help of valuation
professionals at this point. These can be qualified real estate agents
(who could help with both the before and after fair market value of your
property), independent insurance adjustors (my preference over adjusters
who work for your insurance company), or qualified assessors. Whomever
you select, make sure that they give have the expertise and that they
give your valuation in writing.
After all these asset valuations ( both before and
after ) are compiled, you are ready to start calculating your disaster
loss.
Anne-Marie Pollowy Toliver, PhD is a retired
University professor and the author of the
Home Owner’s Guide to Disaster Tax Relief. This easy to read,
step-by-step guide with many examples helps taxpayers to claim all the
allowable disaster tax relief from the IRS. This e-book and other useful
tax and disaster information is available from
http://www.disaster-tax-relief.com
