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Theft Losses
Theft losses (reported on Form 4684) are deductible under rules that
closely follow those for casualty losses, including the $100/10% of
Adjusted Gross Income Floors {Code Sec. 165(a), Code Sec. 165h(h)
(1), Code Sec. 165(h)(2)}
A theft is the unlawful taking and removing of money or property
with the intent to deprive the owner of it, and includes larceny,
robbery, embezzlement {Reg § 1.165-8(d)}, burglary, extortion,
kidnapping for ransom, blackmail and false representation.
Here is how the deduction is calculated:
$100 plus 10% of the adjusted gross income must be deducted from the
total amount of the loss before a deduction is allowed. Here are
examples.
In Example 1, the taxpayer does not meet the requirements to take a
deduction.
In Example 2, the taxpayer meets the requirements.
Example 1
Loss $2,000.00
Less 100.00
Net Loss $1,900.00
Adjusted Gross Income: $25,000
10% of AGI 2,500
The loss is less that the 10% of the adjusted gross income and
cannot be deducted.
Example 2 Deduction meets requirements
Loss $25,000.00
Less 100.00
Net Loss $24,900.00
Adjusted Gross Income: $45,000
10% of AGI 4,500
Net Loss: $24,900.00
Less 10% 4,500.00
Net deduction $20,400.00
This is the amount that can be used on Schedule A of 1040. Form 4684
must be attached to the return and a copy of a police or FBI report
regarding the theft.
If you think you are able to take this deduction, please contact a
tax preparer or accountant to verify that you meet these
requirements.
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