[Federal Register Volume 84, Number 200 (Wednesday, October 16, 2019)]
[Rules and Regulations]
[Pages 55245-55246]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22376]



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 Rules and Regulations
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 This section of the FEDERAL REGISTER contains regulatory documents 
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  Federal Register / Vol. 84, No. 200 / Wednesday, October 16, 2019 / 
Rules and Regulations  

[[Page 55245]]



DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9878]
RIN 1545-BP44


Election To Take Disaster Loss Deduction for Preceding Year

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulation and removal of temporary regulation.

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SUMMARY: This document contains a final regulation relating to the 
election to accelerate the timing of a loss sustained by a taxpayer 
attributable to a federally declared disaster. Additionally, this 
document removes the temporary regulation.

DATES: Effective Date: The final regulation is effective October 11, 
2019.
    Applicability Date: For date of applicability, see Sec.  1.165-
11(h).

FOR FURTHER INFORMATION CONTACT: Daniel Cassano (202) 317-7011 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    This document contains amendments to the Income Tax Regulations (26 
CFR part 1) under section 165(i) of the Internal Revenue Code regarding 
the election to deduct a loss attributable to a federally declared 
disaster for the taxable year prior to the year in which the disaster 
occurred. On October 14, 2016, a temporary regulation (TD 9789) was 
published in the Federal Register (81 FR 70938) relating to the 
election to take a disaster loss deduction for the preceding year. A 
notice of proposed rulemaking (REG-150992-13) cross-referencing the 
temporary regulation was also published in the Federal Register (81 FR 
71025) on October 14, 2016. Finally, a revenue procedure (Rev. Proc. 
2016-53, 2016-44 I.R.B. 530) was published in the Internal Revenue 
Bulletin on October 31, 2016 (the revenue procedure with the proposed 
and temporary regulations collectively, ``the 2016 guidance''). The 
2016 guidance extended the deadline to make the section 165(i) election 
as well as the deadline to revoke the section 165(i) election. The 2016 
guidance also clarified various rules associated with the section 
165(i) election. For example, the 2016 guidance clarified that the 
election is made on either an original Federal income tax return for 
the preceding year or an amended Federal income tax return for the 
preceding year.\1\
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    \1\ To facilitate this election, Section D, Election to Deduct 
Federally Declared Disaster Loss in Preceding Tax Year, was added to 
Form 4684, Casualties and Thefts.
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    No public comments were received and no public hearing was 
requested or held. This final regulation adopts the proposed regulation 
substantially without change. Additionally, the temporary regulation is 
removed.

Special Analyses

    This regulation is not subject to review under section 6(b) of 
Executive Order 12866 pursuant to the Memorandum of Agreement (April 
11, 2018) between the Department of the Treasury and the Office of 
Management and Budget regarding review of tax regulations. Because the 
regulation does not impose a collection of information on small 
entities, a Regulatory Flexibility Act (5 U.S.C. chapter 6) analysis is 
not required. Pursuant to section 7805(f), the notice of proposed 
rulemaking preceding this regulation was submitted to the Chief Counsel 
for Advocacy of the Small Business Administration for comment on its 
impact on small business. No comments were received.

Drafting Information

    The principal author of this regulation is Daniel Cassano of the 
Office of the Associate Chief Counsel (Income Tax & Accounting). 
However, other personnel from the Treasury Department and the IRS 
participated in its development.

Statement of Availability of IRS Documents

    IRS Revenue Procedures, Revenue Rulings, Notices, and other 
guidance cited in this document are published in the Internal Revenue 
Bulletin and are available from the Superintendent of Documents, U.S. 
Government Publishing Office, Washington, DC 20402, or by visiting the 
IRS website at http://www.irs.gov.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *


Sec.  1.165-11T  [Removed]

0
Par. 2. Remove Sec.  1.165-11T.

0
Par. 3. Revise Sec.  1.165-11 to read as follows:


Sec.  1.165-11  Election to take disaster loss deduction for preceding 
year.

    (a) In general. Section 165(i) allows a taxpayer who has sustained 
a loss attributable to a federally declared disaster in a taxable year 
to elect to deduct that disaster loss in the preceding year. This 
section provides rules and procedures for making and revoking an 
election to claim a disaster loss in the preceding year.
    (b) Definitions. The following definitions apply for purposes of 
this section:
    (1) A federally declared disaster means any disaster subsequently 
determined by the President of the United States to warrant assistance 
by the Federal Government under the Robert T. Stafford Disaster Relief 
and Emergency Assistance Act.
    (2) A federally declared disaster area is the area determined to be 
eligible for assistance pursuant to the Presidential declaration in 
paragraph (b)(1) of this section.
    (3) A disaster loss is a loss occurring in a federally declared 
disaster area that is attributable to a federally declared disaster and 
that is otherwise allowable as a deduction for the disaster year under 
section 165(a) and Sec. Sec.  1.165-1 through 1.165-10.
    (4) The disaster year is the taxable year in which a taxpayer 
sustains a loss

[[Page 55246]]

attributable to a federally declared disaster.
    (5) The preceding year is the taxable year immediately prior to the 
disaster year.
    (c) Scope and effect of election. An election made pursuant to 
section 165(i) for a disaster loss attributable to a particular 
disaster applies to the entire loss sustained by the taxpayer from that 
disaster during the disaster year. If the taxpayer makes a section 
165(i) election with respect to a particular disaster occurring during 
the disaster year, the disaster to which the election relates is deemed 
to have occurred, and the disaster loss to which the election applies 
is deemed to have been sustained, in the preceding year.
    (d) Requirement to file consistent returns. A taxpayer may not make 
a section 165(i) election for a disaster loss if the taxpayer claims a 
deduction (as a loss, as cost of goods sold, or otherwise) for the same 
loss for the disaster year. If a taxpayer has claimed a deduction for a 
disaster loss for the disaster year and the taxpayer wants to make a 
section 165(i) election with respect to that loss, the taxpayer must 
file an amended Federal income tax return to remove the previously 
deducted loss on or before the date that the taxpayer makes the section 
165(i) election for the loss. Similarly, if a taxpayer has claimed a 
deduction for a disaster loss for the preceding year based on a section 
165(i) election and the taxpayer wants to revoke that election, the 
taxpayer must file an amended Federal income tax return to remove the 
loss for the preceding year on or before the date the taxpayer files 
the Federal income tax return or amended Federal income tax return for 
the disaster year that includes the loss.
    (e) Manner of making election. An election under section 165(i) to 
deduct a disaster loss for the preceding year is made either on an 
original Federal income tax return for the preceding year or an amended 
Federal income tax return for the preceding year in the manner 
specified by guidance issued pursuant to this section.
    (f) Due date for making election. The due date for making the 
section 165(i) election is six months after the due date for filing the 
taxpayer's Federal income tax return for the disaster year (determined 
without regard to any extension of time to file).
    (g) Revocation. Subject to the requirements in paragraph (d) of 
this section, a section 165(i) election may be revoked on or before the 
date that is ninety (90) days after the due date for making the 
election.
    (h) Applicability date. This section applies to elections and 
revocations that are made on or after October 16, 2019.

Sunita Lough,
Deputy Commissioner for Services and Enforcement.
Approved: September 3, 2019.
 David J. Kautter,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2019-22376 Filed 10-11-19; 4:15 pm]
 BILLING CODE 4830-01-P