Part III. Administrative, Procedural, and Miscellaneous

Expanded Hurricane Katrina Relief for Certain Individual Taxpayers

Notice 2006–56

PURPOSE

This notice supplements and modifies Notice 2006–20, 2006–10 I.R.B. 560 (March 6, 2006), which, under the authority of section 7508A of the Internal Revenue Code, postponed until August 28, 2006, deadlines for certain taxpayers affected by Hurricane Katrina to perform the acts described in Notice 2005–73, 2005–42 I.R.B. 723 (October 17, 2005) ( e.g., filing returns and other documents, payment of taxes). It has come to the IRS’s attention that some affected taxpayers need additional time to complete and file individual income tax returns for 2004 and 2005. This notice provides an additional postponement of time in order for certain individual taxpayers affected by Hurricane Katrina to file a 2004 or 2005 income tax return. Specifically, this notice provides an additional postponement of time until October 16, 2006, for affected taxpayers, as described in Notice 2006–20, with respect to the following individual income tax returns: (1) 2004 individual income tax returns, originally due on April 15, 2005, for which taxpayers obtained an extension of time to file until October 15, 2005, under section 6081, and for which Notice 2006–20 postponed the due date to August 28, 2006; and (2) 2005 individual income tax returns, originally due on April 15, 2006, for which Notice 2006–20 postponed the due date to August 28, 2006. Thus, this notice defines a new group of affected taxpayers, which is a subset of affected taxpayers as described in Notice 2006–20, who are eligible for the relief provided by this notice.

Extension of the Postponement Period for Certain Individual Taxpayers to File Returns

1. Due date for 2004 individual income tax returns, which was extended to October 15, 2005, and postponed to August 28, 2006

Section 7508A authorizes the IRS to postpone deadlines for certain time-sensitive acts for up to one year for taxpayers the IRS determines are affected by a Presidentially-declared disaster. In Notice 2006–20, for affected taxpayers who had already obtained an extension of time to file a 2004 individual income tax return, the IRS postponed the due date of that return from October 15, 2005, to August 28, 2006. Thus, such affected taxpayers have not yet received the maximum one-year postponement that may be permitted under section 7508A. The IRS has determined that certain individual affected taxpayers, as described in Notice 2006–20, may be eligible for additional time to file. Thus, individual taxpayers affected by Hurricane Katrina, who obtained an extension of time to file their 2004 individual income tax returns until October 15, 2005, and who received a postponement until August 28, 2006, are granted a further postponement until October 16, 2006, to file their 2004 individual income tax return. See I.R.C. § 7503.

Under this notice, these affected taxpayers will receive an entire year of section 7508A relief from filing deadlines for 2004 individual income tax returns that had an extended due date of October 15, 2005. Under Notice 2006–20, however, these affected taxpayers already received an entire year of relief from interest and failure to pay penalties for any payment due for the 2004 tax year. Such a payment would otherwise have been due on April 15, 2005. Interest and failure to pay penalties would accrue from April 15, 2005, until August 28, 2005, but were suspended by Notice 2006–20 from August 29, 2005, through August 28, 2006, the maximum one year allowed by section 7508A. Thus, although the IRS can postpone the time to file the 2004 individual income tax return until October 15, 2006 for affected taxpayers who had already obtained an extension of time to file the 2004 individual income tax return until October 15, 2005, section 7508A does not authorize the IRS to grant an additional period of relief with respect to interest and failure to pay penalties for the 2004 tax year. If a taxpayer is unable to make a payment by August 28, 2006, for the 2004 tax year, the taxpayer can request

that the IRS grant relief from the penalty if the failure to pay is due to reasonable cause and not due to willful neglect. The waiver of the penalty would be based on the standards of section 6651.

2. Due date for 2005 individual income tax returns, originally due on April 15, 2006, which was postponed to August 28, 2006 Affected taxpayers, as described in Notice 2006–20, received a postponement of time under section 7508A from April 15, 2006, to August 28, 2006, to file their 2005 individual income tax returns. Thus, these affected taxpayers have not yet received the maximum one-year postponement that may be permitted under section 7508A to file their 2005 individual income tax returns. The IRS has determined that affected taxpayers, as described in Notice 2006–20, are granted a further postponement under section 7508A, to October 16, 2006, to file their 2005 individual income tax returns. Under section 7508A, interest and penalties will not accrue during the period. For affected taxpayers who also request an extension under section 6081 or 6161 on or before October 16, 2006, the period of time to file and/or pay may be postponed until April 15, 2007.

Identifying Affected Taxpayers under this Notice

In order to assist the IRS in identifying affected taxpayers as described in this notice, to ensure that they receive the relief to which they are entitled, affected taxpayers should mark “Hurricane Katrina” in red ink on the top of their returns. In addition, affected taxpayers may identify themselves as eligible for relief by calling the IRS Disaster Hotline at (866) 562–5227.

DRAFTING INFORMATION

The principal author of this notice is Dillon Taylor of the Office of Associate Chief Counsel, Procedure and Administration (Administrative Provisions and Judicial Practice Division). For further information regarding this notice, you may call (202) 622–4940 (not a toll-free call).

2006–28 I.R.B. 58 July 10, 2006

Temporary Relief for Certain REITs and Taxable REIT Subsidiaries That Provide Accommodations to Persons Affected by Hurricanes Katrina and Rita

Notice 2006–58

The Internal Revenue Service will not treat a hotel, motel, or other establishment located in the Gulf Opportunity Zone, as defined in § 1400M of the Internal Revenue Code (26 U.S.C. § 1400M), that otherwise satisfies the definition of a “lodging facility” under § 856(d)(9) as other than a “lodging facility” if it is used to provide temporary housing to certain persons affected by Hurricane Katrina or Hurricane Rita, provided the recordkeeping requirements of this notice are satisfied.

BACKGROUND

On August 28, 2005, and August 29, 2005, the President issued major disaster declarations for the states of Florida, Alabama, Louisiana, and Mississippi as a result of Hurricane Katrina. On September 24, 2005, the President declared major disasters for the states of Louisiana and Texas as a result of Hurricane Rita. These declarations were made pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121–5206. Subsequently, the Federal Emergency Management Agency (FEMA) designated certain counties and parishes as being eligible for individual assistance (or individual and public assistance).

Certain real estate investment trusts (REITs) that own lodging facilities expressed concern that extended stays at those facilities by persons affected by these disasters may cause the REITs to fail to satisfy the income tests under §§ 856(c)(2) and (c)(3). Although rents from real property generally are treated as qualifying income for purposes of these tests, amounts received or accrued from a corporation in which the REIT owns stock are subject to special rules. Under one of these rules, if a REIT leases an interest in real property that is a qualified lodging facility to a taxable REIT subsidiary (TRS) of that REIT, then the lease payments may

qualify as rents from real property if the property is operated on behalf of the TRS by a person who is an eligible independent contractor. Section 856(d)(9)(D)(ii) provides that a “lodging facility” is a hotel, motel, or other establishment more than one-half of the dwelling units in which are used on a transient basis. Section 856 and the regulations thereunder do not define the term “transient basis”. Accordingly, the Internal Revenue Service issued Notice 2005–89, 2005–49 I.R.B. 1077, which provided that the Service will not treat an establishment that met the definition of “lodging facility” as anything other than a “lodging facility” if it was used to provide temporary housing to certain persons affected by Hurricane Katrina or Hurricane Rita, provided certain recordkeeping requirements were satisfied. Notice 2005–89 was effective for six months from its effective date, August 28, 2005.

TRANSIENT BASIS REQUIREMENT

Due to the magnitude of the disaster, the Service has become aware of the continued need for temporary housing for certain persons affected by Hurricanes Katrina and Rita beyond February 28, 2006, the expiration date of Notice 2005–89. Accordingly, for purposes of § 856(d)(9)(D)(ii), the Service will not treat a dwelling unit within a lodging facility located in the Gulf Opportunity Zone as being used other than on a transient basis during any six month period beginning on or after February 28, 2006, through the date on which this notice expires, if the unit is used to provide shelter to (a) an individual whose principal residence for purposes of § 1033(h)(4) on August 28, 2005, was located in a covered disaster area and who has been displaced because the residence has been destroyed or damaged as a result of Hurricane Katrina or Hurricane Rita (a displaced resident); (b) employees of business entities whose principal place of business is located in a covered disaster area who have been relocated to other areas where the business entities have job openings (a displaced employee); or (c) a worker assisting in relief activities in the covered disaster area, whether or not the worker is affiliated with a recognized government or philanthropic organization (a relief worker).

A TRS that is the lessee of a hotel, motel, or other establishment and that seeks to

rely on this notice with respect to the provision of shelter to a displaced resident, displaced employee, or relief worker for any period after February 28, 2006, must keep records for each six month period in which it seeks to rely on this notice indicating the dates on which shelter was provided, and the name and address of the displaced resident, displaced employee, or relief worker. In addition, (a) with respect to a displaced employee, the TRS must keep records indicating the individual’s employer, and (b) with respect to any relief worker, the TRS must keep records indicating the name of the individual’s employer or sponsoring organization and the nature of the relief activities undertaken during the individual’s stay.

EFFECTIVE DATE

This notice is effective February 28, 2006, and will expire on August 28, 2007.

PAPERWORK REDUCTION ACT

The collections of information in the notice have been reviewed and approved by the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–1977.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collections of information in the notice are in the section of this notice entitled “Transient Basis Requirement”. The collections of information are required for compliance with § 856(d)(9)(D). The collections of information are required to obtain a benefit. The likely respondents are corporations.

The estimated total annual reporting burden is 500 hours.

The estimated annual burden per respondent varies from 25–75 hours, depending on the circumstances, with an average of 50 hours. The estimated number of respondents is 10.

Books or records relating to a collection of information must be retained as long as their contents may become material to the administration of the internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

July 10, 2006 59 2006–28 I.R.B.

MAJOR DISASTER LEAVE-SHARING PLAN

For purposes of this notice, a major disaster leave-sharing plan is a written plan meeting each of the following requirements:

1. The plan allows a leave donor to deposit accrued leave in an employer-sponsored leave bank for use by other employees who have been adversely affected by a major disaster. For purposes of the plan, an employee is considered to be adversely affected by a major disaster if the disaster has caused severe hardship to the employee or a family member of the employee that requires the employee to be absent from work.

2. The plan does not allow a leave donor to deposit leave for transfer to a specific leave recipient.

3. The amount of leave that may be donated by a leave donor in any year generally does not exceed the maximum amount of leave that an employee normally accrues during the year.

4. A leave recipient may receive paid leave (at his or her normal rate of compensation) from leave deposited in the leave bank. Each leave recipient must use this leave for purposes related to the major disaster.

5. The plan adopts a reasonable limit, based on the severity of the disaster, on the period of time after the major disaster occurs during which a leave donor may deposit the leave in the leave bank, and a leave recipient must use the leave received from the leave bank.

6. A leave recipient may not convert leave received under the plan into cash in lieu of using the leave. However, a leave recipient may use leave received under the plan to eliminate a negative leave balance that arose from leave that was advanced to the leave recipient because of the effects of the major disaster. A leave recipient also may substitute leave received under the plan for leave without pay used because of the major disaster.

7. The employer must make a reasonable determination, based on need, as to how much leave each approved leave recipient may receive under the leave-sharing plan.

8. Leave deposited on account of one major disaster may be used only for employees affected by that major disas

DRAFTING INFORMATION

The principal author of this notice is Jonathan D. Silver of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this notice, contact Mr. Silver at (202) 622–3930 (not a toll-free call).

Amounts Paid Pursuant to a Leave-Sharing Plan to Assist Employees Affected by a Major Disaster Declared by the President of the United States

Notice 2006–59

PURPOSE

This notice provides guidance on the federal tax consequences of certain leave-sharing plans that permit employees to deposit leave in an employer-sponsored leave bank for use by other employees who have been adversely affected by a major disaster, as defined herein.

BACKGROUND

Section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), 42 U.S.C. § 5170, provides that the President may declare an event a major disaster. The President also may determine that the major disaster warrants individual assistance or individual and public assistance from the federal government under the Stafford Act. See, e.g., 42 U.S.C. § 5170b. Section 9004 of Pub. L. No. 105–18, 5 U.S.C. § 6391, provides that in the event of a major disaster or emergency, as declared by the President, that results in severe adverse effects for a substantial number of employees, the President may direct the Office of Personnel Management to establish a leave-sharing plan for federal employees who are adversely affected by the disaster or emergency.

Section 61(a) of the Internal Revenue Code provides that, except as otherwise provided by law, gross income means all income from whatever source derived.

Under the facts of Rev. Rul. 90–29, 1990–1 C.B. 11, an employer establishes

a leave-sharing plan under which employees who suffer “medical emergencies” may qualify as recipients of leave surrendered to the employer, or deposited in an employer-sponsored leave bank, by other employees. The ruling concludes that the amounts the employer pays to a leave recipient pursuant to the plan are includible in the gross income of the recipient under § 61 as compensation for services provided by that recipient to the employer, and “wages” for purposes of the Federal Insurance Contributions Act (FICA), the Federal Unemployment Tax Act (FUTA), the Railroad Retirement Tax Act (RRTA), the Railroad Unemployment Repayment Tax (RURT), and income tax withholding, unless excluded therefrom under a specific provision of the Code. The ruling also concludes that an employee who surrenders leave to the employer or deposits leave in the leave bank pursuant to the plan does not realize any income or incur any deductible expense or loss upon the surrender or deposit of the leave or its use by the recipient. The ruling also states that its conclusions and rationale apply only to bona fide employer-sponsored leave-sharing arrangements.

DEFINITIONS

Major disaster means (a) a major disaster as declared by the President under § 401 of the Stafford Act, 42 U.S.C. § 5170, that warrants individual assistance or individual and public assistance from the federal government under that Act, or (b) a major disaster or emergency as declared by the President pursuant to 5 U.S.C. § 6391, in the case of employees described in that statute.

Major disaster leave-sharing plan means a plan that meets the requirements of this notice.

Leave donor means a current employee of the employer whose voluntary written request to deposit leave in a leave bank under a major disaster leave-sharing plan is approved by the employer.

Leave recipient means a current employee for whom the employer has approved an application to receive leave under a major disaster leave-sharing plan.

Family member means any family member as defined by the major disaster leave-sharing plan.

2006–28 I.R.B. 60 July 10, 2006

wages” for purposes of RURT, unless excluded therefrom under a specific provision of the Code. A leave donor may not claim an expense, charitable contribution, or loss deduction on account of the deposit of the leave or its use by a leave recipient.

DRAFTING INFORMATION

The principal author of this notice is Shareen S. Pflanz of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice, contact Shareen S. Pflanz at (202) 622–4920 (not a toll-free call).

ter. Except for an amount so small as to make accounting for it unreasonable or administratively impracticable, any leave deposited under a major disaster leave-sharing plan that is not used by leave recipients by the end of the period specified in paragraph 5, above, must be returned within a reasonable period of time to the leave donors (or, at the employer’s option, to those leave donors who are still employed by the employer) so that the donor will be able to use the leave. The amount of leave returned to each leave donor must be in the same proportion as the amount of leave donated by the leave

donor bears to the total amount of leave donated on account of that major disaster.

GUIDANCE

The IRS will not assert that a leave donor who deposits leave in an employersponsored leave bank under a major disaster leave-sharing plan realizes income or has wages, compensation, or rail wages with respect to the deposited leave, provided that the plan treats payments made by the employer to the leave recipient as “wages” for purposes of FICA, FUTA, and income tax withholding, and as “compensation” for purposes of RRTA and “rail

26 CFR 601.105: Examination of returns and claims for refund, credit or abatement; determination of correct tax liability. (Also Part I, §§ 165, 1400M, 1400S; 1.165–7(a)(2), 1.165–7(b), 1.165–8(c).)

Rev. Proc. 2006–32

TABLE OF CONTENTS

SECTION 1. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

SECTION 2. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

SECTION 3. SCOPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

.01 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 .02 Definition of personal-use residential real property and personal residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 .03 Definition of personal belongings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 .04 Use of three personal-use residential real property safe harbor methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 .05 Use of Cost Indexes Safe Harbor Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

(1) Total loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 (2) Near total loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 (3) Interior flooding over 1 foot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 (4) Structural damage from wind, rain, or debris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 (5) Roof covering damage from wind, rain, or debris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 (6) Detached structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 (7) Wood decking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 .06 Taking into account no-cost repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 .07 Use of Personal Belongings Safe Harbor Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 .08 Limited use of safe harbor methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

SECTION 4. PERSONAL-USE RESIDENTIAL REAL PROPERTY SAFE HARBOR METHODS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

.01 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 .02 Insurance Safe Harbor Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 .03 Contractor Safe Harbor Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 .04 Cost Indexes Safe Harbor Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

(1) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 (2) Special rules for Cost Indexes Safe Harbor Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 (3) Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Table 1 – Total Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Table 2 – Near Total Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Table 3 – Interior Flooding Over 1 Foot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Table 4 – Structural Damage From Wind, Rain, or Debris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Table 5 – Roof Covering Damage From Wind, Rain, or Debris. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Table 6 – Detached Structures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

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Table 7 – Wood Decking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

SECTION 5. COST INDEXES SAFE HARBOR METHOD EXAMPLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

SECTION 6. REDUCTION FOR NO-COST REPAIRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

SECTION 7. PERSONAL BELONGINGS SAFE HARBOR METHOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

.01 Certain personal belongings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 .02 Exclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 .03 Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

SECTION 8. EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

SECTION 9. REPORTING ON FORM 4684 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

SECTION 10. PAPERWORK REDUCTION ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

SECTION 11. DRAFTING INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

$100. Section 165(h)(2) provides that if personal casualty and theft losses for any taxable year exceed personal casualty and theft gains for the taxable year, the losses are allowed only to the extent of the sum of the amount of the gains, plus so much of the excess as exceeds ten percent of the adjusted gross income of the individual.

.03 Section 1400M(2) defines “Hurricane Katrina disaster area” as an area with respect to which a major disaster has been declared by the President before September 14, 2005, under § 401 of Robert T. Stafford Disaster Relief and Emergency Assistance Act (“Stafford Act”) (42 USC § 5170) by reason of Hurricane Katrina. The Hurricane Katrina disaster area covers the entire states of Alabama, Florida, Louisiana, and Mississippi. Section 1400M(4) defines “Hurricane Rita disaster area” as an area with respect to which a major disaster has been declared by the President before October 6, 2005, under § 401 of the Stafford Act by reason of Hurricane Rita. The Hurricane Rita disaster area covers the entire states of Louisiana and Texas. Section 1400M(6) defines “Hurricane Wilma disaster area” as an area with respect to which a major disaster has been declared by the President before November 14, 2005, under § 401 of the Stafford Act by reason of Hurricane Wilma. The Hurricane Wilma disaster area covers the entire state of Florida.

.04 Section 1400S(b) suspends the limitations on personal casualty and theft loss deductions imposed by § 165(h) if the losses are attributable to the applicable 2005 Gulf hurricane and arose in the (1) Hurricane Katrina disaster area on or after August 25, 2005, (2)Hurricane Rita disas