Ask a CPA

If you are a nonresident alien of the U.S. who does not qualify as a bona fide resident of Puerto Rico for the entire year, you must file:
A Puerto Rican tax return reporting only your income from Puerto Rican sources. Wages for services performed in Puerto Rico, whether from the U.S. government, private employer, or otherwise, is income from Puerto Rican sources.
A U.S. tax return (Form 1040NR) according to the rules for a nonresident alien.

If you are a U.S. citizen or Resident Alien and also a bona fide resident of Puerto Rico during the entire tax year, you generally must file:,br> A Puerto Rican tax return reporting income from worldwide sources. If you report U.S. source income on your Puerto Rican tax return, you can claim a credit against your Puerto Rican tax, up to the amount allowable for income taxes paid to the United States.
A U.S. tax return reporting income from worldwide sources, but Excluding Puerto Rican source income. If you are excluding Puerto Rican income on your U.S. tax return, you will not be allowed any deductions or credits that are directly or indirectly allocable to exempt income.
If all your income is from Puerto Rican sources, you are not required to file a U.S. tax return.

If you are a bona fide resident of Puerto Rico during the entire tax year and a nonresident alien of the U.S., you generally must file:,br> A Puerto Rican tax return reporting income from worldwide sources. If you report U.S. source income on your Puerto Rican tax return, you can claim a credit against your Puerto Rican tax, up to the amount allowable for income taxes paid to the United States.
A U.S. tax return (Form 1040) reporting income from worldwide sources, but Excluding Puerto Rican source income other than amounts for services performed as an employee of the U.S. or any of its agencies.
For tax purposes other than reporting income, you will be treated as a nonresident alien individual with its associated limitations.

A deductible loss can result from a number of events. Here are some examples:
•Storm (including hurricanes and tornadoes). •Flood and wind, •Fire, •Earthquake,
•Other “sudden and unexpected events,” such as an automobile accident, also qualify as a casualty for tax purposes.

The taxpayer Has the Burden of Proof. To deduct a casualty loss, the taxpayer must meet all of the following tests and requirements to take a casualty loss:
•Be able to show that there actually was a casualty loss including showing all of the following:
The type of casualty, Its date of occurrence, That the loss was a direct result of the casualty , That the taxpayer owned the property or was liable for the damage to the owner of the property, and whether there is a claim for insurance reimbursement with a reasonable expectation of recovery. and Justify the amount taken as a deduction.

The allowable deduction for business property destroyed in a casualty is usually different from the loss of personal property.
If the property is used in a trade or business or other activity conducted for profit, the allowable deduction is the lesser of the property’s adjusted basis (before the casualty) or its decline in value because of the casualty.
If business property is completely destroyed, the deduction is the full amount of the property’s adjusted basis, reduced by any insurance recovery, even if the basis exceeded the property’s value before the casualty.
If you have disaster-related losses to business assets, you don’t have to worry about the $100 subtraction rule or the 10% of AGI subtraction rule. Instead, you can deduct the full amount of your uninsured loss as a business expense

The Taxpayer Advocate Service "TAS" can help if you can’t resolve your problem with the IRS. If you think TAS might be able to help you, call your local advocate, whose number is in your phone book and on the IRS website at www.irs.gov/advocate. You can also call the toll-free number at 1-877-777-4778 or TTY/TDD 1-800-829-4059.
TAS is your voice at the IRS. The TAS job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. They offer free help to guide you through the often-confusing process of resolving tax problems that you haven’t been able to solve on your own.
If you qualify for our help, They will do everything they can to get your problem resolved. You will be assigned to one advocate who will be with you at every turn. They have offices in every state, the District of Columbia, and Puerto Rico. Although TAS is independent within the IRS, the advocates know how to work with the IRS to get your problems resolved. And the services are always FREE.
As a taxpayer, you have rights that the IRS must abide by in its dealings with you. The tax toolkit at www.TaxpayerAdvocate.irs.gov can help you understand these rights.

You figure the amount of your loss using the following steps.
1.Determine your cost or other basis in the property before the casualty or theft.
2.Determine the decrease in fair market value (FMV) of the property as a result of the casualty or theft. (The decrease in FMV is the difference between the property's value immediately before and immediately after the casualty or theft.)
3.From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive

After you have figured the amount of your loss, as discussed earlier, you must figure how much of the loss you can deduct. You do this on Form 4684, section A. If the loss was to property for your personal use or your family's, there are two limits on the amount you can deduct for your casualty or theft loss.
1.You must reduce each casualty or theft loss by $100 ($100 rule).
2.You must further reduce the total of all your losses by 10% of your adjusted gross income (10% rule).

You can generally deduct a casualty or disaster area loss only in the tax year in which the casualty or disaster occurred. You can generally deduct a theft loss only in the year you discovered your property was stolen. However, you can choose to deduct disaster area losses on your return for the year immediately before the year of the disaster if the President has declared your area a federal disaster area.
For details, see Disaster Area Losses in Publication 547.