February 21, 2008

1. Wildfire Roadmap to Recovery:
Wildfire Roadmap to Recovery:
Meeting #8, February 21, 2008
Meeting #8, February 21, 2008
Rancho Bernardo Community Presbyterian Church
Rancho Bernardo Community Presbyterian Church
Tax Issues: Personal Property & Real Property
Tax Issues: Personal Property & Real Property

2. Fine print:
The information provided in this program is intended for
general educational purposes only. It should not be
construed as legal advice.
The speakers at today’s program are volunteering their
time as educators.
Neither United Policyholders nor the Rancho Bernardo
Community Presbyterian Church endorse or warrant the
quality or services of any volunteer speakers.

3. Income Tax Issues & Real Property
Tax Issues
Background: For ’03 Cedar Fire Survivors,
there was much confusion/misunderstanding
regarding both of these issues

4. Knowledge is power…
THANK YOU TO TONIGHT’S SPEAKERS
FOR HELPING EVERYONE AVOID
COMMON PITFALLS
Alan Clopine, CPA
Jeff Olson, San Diego County Assessor’s
Office

5. Income Tax Implications –
Alan Clopine, CPA
On 10/29/07, the IRS granted tax relief for
Southern California Fire Victims
Affected taxpayers can claim disaster-related
casualty losses on their federal income tax
returns in either 2006 or 2007
If you claim the disaster loss on last year’s
return, put the disaster designation “California
Wildfires” at the top of the form

6. Calculating the Disaster Loss
FIRST: Determine the adjusted basis in the property
before the disaster loss (generally the original purchase
price PLUS improvements LESS depreciation deducted)
SECOND: Determine the decrease in fair market value
of the property as a result of the disaster loss.
(Appraisals of the property both BEFORE and AFTER
the disaster loss are a good idea)
THIRD: From the smaller of the amounts you determined
in (1) and (2), subtract any insurance or other
reimbursement you received or expect to receive.

7. EXAMPLE:
Figuring the Disaster Loss Deduction: An Example
Adjusted basis of property $500,000 (A)
FMV before disaster loss $850,000
FMV after disaster loss $250,000
Decrease in FMV $600,000 (B)
Loss [smaller of (A) or (B)] $500,000
Subtract insurance received $375,000
Loss after reimbursement $125,000
(Note: This $125,000 loss must be in excess of 10% of adjusted
gross income to receive a tax benefit).

8. How To Take The Loss
The Prior Example Showed a Loss of $125,000
This loss may be deducted on the taxpayer’s 2007 return (to be filed
by 4/15/08)
OR
The loss may be deducted on the taxpayer’s 2006 return
(file an amended return for 2006)
THIS MUST BE FILED BY APRIL 15, 2008
The taxpayer decides which year the deduction is more beneficial

9. What If I Haven’t Received My
Insurance Proceeds Yet?
You should estimate the amount you expect to
receive in insurance proceeds.
If you later find the insurance reimbursement
was different that what you expected, you adjust
your return in the year received.

10. Can I Have A Gain Even Though
I’ve Lost My Home?
Yes, if your insurance reimbursement exceeds the lower
of your adjusted basis and decrease in FMV, you have a
gain.
HOWEVER, that gain is not currently taxable if you build
a replacement property:
Main home: replace within four years after the close of the first
tax year in which your gain is realized
Other property: replace within two years after the close of the
first tax year in which your gain is realized.

11. Additional Resources
IRS Publication 2194 (Disaster Losses Kit for Individuals).
This publication has good worksheets to help quantify
your property losses. www.irs.gov
IRS Publication 547 (Casualties, Disasters, and Thefts).
www.irs.gov
FTB Publication 1034 (Disaster Loss). www.ftb.ca.gov
Call Alan Clopine, CPA at Centara Capital (619) 398-
1700. http://www.centaracapital.com/company/bio-
aclopine.html

12. Under state law, the Assessor must
reassess property upon new construction
Excluded from the definition of “new construction” is any
timely reconstruction where the property after
reconstruction is substantially equivalent to the
property prior to damage or destruction.
However, State law ALSO provides that any
reconstruction that is not substantially equivalent to
the damaged or destroyed property shall be deemed to
be new construction and only that portion that
exceeds substantially equivalent reconstruction
shall have a new base year value.

13. Know the facts…
There has been a common
misconception that calamity victims
can build up to 500 additional square
feet without incurring additional
property taxes.
This is not the case!

14. Additional square footage is subject
to reassessment at market value
For property tax purposes,
any square footage that is above
and beyond what existed prior to the
calamity is subject to reassessment
at market value.

15. Also subject to reassessment…
Anything that is built after the calamity
that did not exist or was not assessed
prior to the calamity is subject to
reassessment.
For example: Air conditioning,
additional bathrooms, patios, decks
and garages

16. Improved quality is reassessable…
When the quality of newly constructed
structures is substantially greater
than that which was lost, this
difference in value is also
reassessable.

17. Construction which is above and beyond what existed and
was assessed before the calamity is reassessed at market
value.
Therefore, when assessing new construction
after a calamity, the Assessor’s Office is
required to compare the structures that were
damaged or destroyed with the new
replacement structures.

18. Assessment of pre-calamity
structures…
In order to receive credit for pre-calamity structures, the
structures must have been present in the Assessor’s
records and assessed on the property tax roll.
For example, if a taxpayer lost a garage in a fire, but the garage
was built without a permit and was never assessed for property
taxes, no credit would be given and the rebuilt garage would be
reassessed at market value.
The structures that were a part of the tax records before
the calamity shall retain their original base assessment.

19. If you have further questions…
Contact the Assessor’s
Office at (619) 505-6262

20. Our heartfelt thanks to:
Rancho Bernardo Community
Presbyterian Church
All our UP Mentors and Sponsors
The speakers at tonight’s meeting

21. Break Out Sessions
for Fire Survivors
Open to 9:30 pm: Firm Stop time
Upstairs:
State Farm : Dormer West
Farmers : Skylight West
Allstate : Upper Courtside East
USAA: Small room off lobby (see D Shalinsky)
Other Companies: Sanctuary