SSTS No. 4, Use of Estimates – Casualty Losses of Real and Personal Property FAQs 

Published June 20, 2014

The answers to these frequently asked questions (FAQs) are based on guidance developed by the SSTS Guidance Task Force in response to questions that were presented during the SSTS public exposure period and since that time in administering the SSTSs. These FAQs are not rules, regulations, or official statements of the Tax Executive Committee issued pursuant to its rule-making authority and, therefore are not authoritative guidance.

The SSTSs should be used in conjunction with these FAQs. The answers to these FAQs may not necessarily address the requirements of other regulatory bodies, including State Boards of Accountancy, the Internal Revenue Service, and other tax regulatory bodies whose rules may differ from those of the AICPA. A member should always consult these other sources to insure compliance with all appropriate regulatory requirements.


1. For purposes of a casualty loss determination in regard to a taxpayer's primary residence, may a member accept a taxpayer’s estimate for improvements when receipts are missing during the period of ownership?
2. May a member accept an insurance company's estimate for the fair market value in determining any loss on personal property destroyed in a fire?

3. May a member accept a taxpayer's estimates in preparing a return?

1. A taxpayer’s residence was destroyed by a fire and the taxpayer has to prepare a list of improvements and a computation of basis of the residence for both insurance and casualty loss purposes. The taxpayer has owned the residence for many years and does not have receipts for all improvements made during the period of ownership. The member has reviewed the taxpayer’s list of improvements and estimate of basis, and considers them reasonable. May the member accept the taxpayer’s estimate for the improvements made by the taxpayer where receipts are missing during the period of ownership in determining any casualty loss on the fire?

The member may accept a taxpayer’s estimate of basis in the residence because it is not practical to obtain exact data and when the member considers the taxpayer’s estimate reasonable based on the facts and circumstances known to the member. The member should use professional judgment as to whether disclosure is required under Paragraph 7 of SSTS No. 4. The member should also consider other applicable rules, including the rules of the taxing jurisdiction.

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2. A taxpayer’s residence was partially destroyed by a fire and the taxpayer is preparing a computation of basis for the personal property lost in the fire. The taxpayer does not have receipts for all personal property in the residence and must estimate the date acquired, cost, and fair market value (FMV) for much of the personal property. The taxpayer develops an insurance claim submission by walking through the property with an insurance adjuster from the taxpayer's insurer. In addition to the taxpayer’s written estimates, the taxpayer furnished the member with the sworn proof of claim submitted to the insurance company with all personal property items lost and a copy of the taxpayer’s insurance policy. May the member accept the insurance company's estimate for the FMV in determining any loss on the personal property destroyed in the fire?

The member should be able to accept the insurance company’s estimate, as the insurance adjuster would only want to pay only what the property is worth and is disinterested in the tax effect.

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3. A husband and wife sell their residence and have a substantial gain. They have owned the residence for a number of years and have done extensive improvements during the time they owned the residence. The taxpayers do not have receipts for all of the improvements, but they have furnished the member with a list of improvements and estimated costs of these improvements. In addition to the taxpayer’s list of improvements, the taxpayers have furnished the member with pictures of the residence taken in previous years showing improvements, a copy of the insurance policy documents from previous municipal code inspections, and filings with the state for real estate taxes. May the member accept the taxpayers’ estimates in preparing the return?

It seems reasonable to use the taxpayers' estimates.

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