Billionaire Boys Club Member Forum (BBCMF)

[02opida]

Highlights of the new act include:

Casualty Loss

-- Personal casualty loss claims related to the designated Hurricane
Katrina disaster area are not subject to the $100 per casualty
reduction and the 10 percent of adjusted gross income (AGI)
subtraction.
-- For example, Mary is a single taxpayer with an annual AGI of
$15,000 who rents a home in the Hurricane Katrina disaster area. Her
car and household belongings were destroyed by Hurricane Katrina, and
they were not covered by insurance. Mary paid $10,000 for the car and
$10,000 for the household belongings, but before Hurricane Katrina,
the fair market value (FMV) of the car was $6,000 and $2,500 for her
belongings. Under the regular casualty rules, Mary would have been
allowed a deduction of $6,900. Under the KETRA, she is allowed a
casualty deduction of $8,500.
-- Taxpayers whose personal or business property has been destroyed or
damaged will have up to five years to replace the property. However,
the destroyed or damaged property and the replacement property must be
located in the Hurricane Katrina disaster area.
-- For example, Joe is a displaced taxpayer from the Hurricane Katrina
disaster area whose home was destroyed. He purchased the home for
$50,000, and it had an FMV of $400,000 before Hurricane Katrina. Joe
received an insurance reimbursement of $380,000 on December 15, 2005.
Joe has a potentially taxable gain of $330,000. Prior to the KETRA,
Joe had until December 15, 2009 to replace his home. He now has until
December 15, 2010 to replace it.

Earned Income Tax Credit (EITC) and Additional Child Tax Credit

-- Qualified individuals (taxpayers whose main residences were in the
Hurricane Katrina disaster area as of August 25, 2005) will be
eligible to elect to use their 2004 earned income to calculate the
EITC and the Additional Child Tax Credit. Taxpayers' 2005 earned
income must be lower than their 2004 earned income, and the election
to use the 2004 income is uniformly applied to both the EITC and the
Additional Child Tax Credit.

Personal Debt

-- Cancellation of personal debt after August 25, 2005 and before
January 1, 2007 for qualified individuals (taxpayers who cannot repay
debt due to the devastating effects of Hurricane Katrina) will not be
taxable.

Pensions and Individual Retirement Accounts (IRAs)

-- Qualified individuals (taxpayers who suffered an economic loss as a
result of Hurricane Katrina and whose principal residences were in the
Hurricane Katrina disaster area) can receive a qualified distribution
from their IRA or a qualified pension plan without being subject to
the 10 percent additional tax.
-- KETRA also allows the distribution to be re-contributed in a three-
year period following the date of the distribution. If the taxpayer
cannot repay the distribution, KETRA allows the taxpayer to pay the
taxes equally over three years. Taxpayers may elect to include the
total distribution in income in one year.
-- For example, Bob is 58 years old and a displaced taxpayer from the
Hurricane Katrina disaster area. He withdraws $30,000 from this IRA to
help cover necessary expenses during the aftermath of Hurricane
Katrina. Generally, a taxpayer would pay $3,000 in additional taxes
and include the $30,000 in income on the tax return. Under KETRA, Bob
will not pay the $3,000 in additional taxes and may also re-contribute
the $30,000 over the next three years. If he does not re-contribute
the $30,000, he may include in income $10,000 per year for three
years.
> :)