Simplifying Disaster Loss Deductions With IRS Revenue Procedure 2016-53

  • Real estate
  • 1/17/2025
Businesswoman wokring on laptop in coffee shop

Revenue Procedure 2016-53 offers a streamlined approach to managing disaster losses, offering essential financial relief in times of crisis.

Navigating the complexities of tax regulations can be daunting, especially when it comes to disaster loss deductions. IRS Revenue Procedure 2016-53 offers a clear framework for real estate businesses, investors, and taxpayers to elect to deduct disaster losses for the taxable year immediately preceding the year in which the disaster occurred.

This procedure may be particularly beneficial for those recently affected by federally declared disasters, such as individuals and businesses impacted by the wildfires and straight-line winds that began on January 7 across parts of southern California.

How to elect disaster loss deductions effectively

Under Section 165(i) of the Internal Revenue Code, a disaster loss is a type of casualty loss that can be deducted in the year the disaster occurred. However, Revenue Procedure 2016-53 allows taxpayers to elect to treat these losses as having occurred in the prior taxable year, providing an opportunity for immediate tax relief. This election must be made on either an original or amended federal tax return for the preceding year, accompanied by a detailed election statement.

The election statement must include specific information such as the name or description of the disaster, the dates of the disaster, and the location of the damaged or destroyed property. This provides the IRS with all the necessary details to process the election efficiently.

Additionally, the procedure outlines the requirements for revoking an election, which must be done within 90 days after the due date for making the election.

Key deadlines and extensions for disaster loss deductions

Revenue Procedure 2016-53 also extends the deadline for making the §165(i) election to six months after the due date of the taxpayer's federal income tax return for the disaster year, without regard to any extensions. This extension provides taxpayers with ample time to assess their losses and make informed decisions about their tax filings. The temporary regulations accompanying this procedure further clarify the process, facilitating consistency and compliance.

How CLA can help

Revenue Procedure 2016-53 offers a streamlined approach to managing disaster losses, providing much-needed financial relief in times of crisis. By understanding and utilizing this procedure, real estate businesses, investors, and taxpayers can better navigate the aftermath of a disaster and focus on recovery.

At CLA, our experienced tax professionals can help assess your disaster losses and determine an effective tax strategy for immediate relief. Our team is dedicated to providing impeccable client service and helping you achieve successful outcomes. Contact us today to learn more about how we can assist you with disaster loss deductions and other tax-related matters.

This blog contains general information and does not constitute the rendering of legal, accounting, investment, tax, or other professional services. Consult with your advisors regarding the applicability of this content to your specific circumstances.

Experience the CLA Promise


Subscribe