SECTION 4. PERSONAL-USE

RESIDENTIAL REAL PROPERTY SAFE HARBOR METHODS

.01 In general . An individual within the scope of this revenue procedure may use any one of the three safe harbor methods described in this section 4. If an individual owns two or more parcels of personal-use residential real property, the use of a safe harbor method for one parcel does not require the individual to use the same safe harbor method, or any safe harbor method, for any other parcel.

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.02 Insurance Safe Harbor Method . Under the Insurance Safe Harbor Method, to determine the decrease in the fair market value of the individual’s personal-use residential real property, an individual may use the estimated loss determined in reports prepared by the individual’s homeowners’ or flood insurance company setting forth the estimated loss the individual sustained as a result of the damage to or destruction of the individual’s personal-use residential real property from one of the 2005 Gulf hurricanes.

.03 Contractor Safe Harbor Method . Under the Contractor Safe Harbor Method, to determine the decrease in the fair market value of the individual’s personal-use residential real property, an individual may use the contract price for the repairs specified in an itemized contract prepared by a contractor, licensed or registered in accordance with State or local regulations, setting forth the costs to restore the individual’s personal-use residential real property to the condition existing immediately prior to the applicable 2005 Gulf hurricane. However, the costs of any improvements or additions that increase the value of the personal-use residential real property above its pre-hurricane value, such as the cost to elevate the personal residence to meet new construction requirements, must be excluded from the contract price for purposes of this safe harbor. To use the Contractor Safe Harbor Method, the contract must be a binding contract signed by the individual and the contractor.

.04 Cost Indexes Safe Harbor Method .

(1) In General . Under the Cost Indexes Safe Harbor Method, an individual may use one or more of the cost indexes, as applicable, provided in this section 4.04 to determine the decrease in the fair market value of personal-use residential real property, including the personal residence, de

tached structures, and wood decking. Cost indexes are provided for three size categories of personal residences based on the square footage of the personal residence.

In computing the decrease in fair market value under the Cost Indexes Safe Harbor Method, an individual must take into account the value of any no-cost repairs as described in section 6 of this revenue procedure.

If the Cost Indexes Safe Harbor Method described in this section 4.04 is used, the amount determined is the full amount of the decrease in fair market value of that personal-use residential real property, and may not be increased by amounts related to items such as landscaping, debris removal, demolition, etc.

The Cost Indexes Safe Harbor Method applies only to the following three types of improvements on an individual’s personal-use residential real property: a personal residence (as described in section 3.02 of this revenue procedure), a detached structure (as described in section 3.05(6) of this revenue procedure), and a pressure treated wood deck (as described in section 3.05(7) of this revenue procedure). If there is any other type of improvement on an individual’s personal-use residential real property that is not described in sections 3.02, 3.05(6) and 3.05(7) of this revenue procedure, the individual may use the Cost Indexes Safe Harbor Method to determine the decrease in fair market value of the personal-use residential real property, but may not add any amount for the other type of improvements. For example, under the Cost Indexes Safe Harbor Method, no amount may be added to the decrease in fair market value of the personal-use residential real property for a residence that contains a home office, a residence in a structure that contains five or more residential units, a detached structure

equipped with heating or air conditioning, or a deck made of synthetic material or hardwood that is not pressure treated.

(2) Special rules for Cost Indexes Safe Harbor Method .

(a) A personal residence may not be subject to more than one of the following tables: Table 1 (Total Loss); Table 2 (Near Total Loss); or Table 3 (Interior Flooding Over 1 Foot).

(b) A personal residence subject to Table 3 (Interior Flooding Over 1 Foot) also may be subject to Table 4 (Structural Damage From Wind, Rain, or Debris), but the square footage flooded may not be included in the square footage used for Table 4 (Structural Damage From Wind, Rain, or Debris).

(c) A personal residence subject to Table 3 (Interior Flooding Over 1 Foot) or Table 4 (Structural Damage From Wind, Rain, or Debris) may also be subject to Table 5 (Roof Covering Damage from Wind, Rain, or Debris).

(d) Table 6 (Detached Structures) and Table 7 (Wood Decking) may apply to any personal-use residential real property to which Table 1 (Total Loss), Table 2 (Near Total Loss), or Table 3 (Interior Flooding Over 1 Foot), Table 4 (Structural Damage From Wind, Rain, or Debris), or Table 5 (Roof Covering Damage From Wind, Rain, or Debris) apply.

(e) If an individual’s personal-use residential real property contains more than one personal residence and the individual uses the Cost Indexes Safe Harbor Method, the individual must apply the applicable table, or combination of tables, to each personal residence.

(3) Tables . The following tables set forth the cost indexes for each corresponding category described in section 3.05 of this revenue procedure:

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Table 1 - Total Loss

Cost Indexes – Total Loss

applicable Cost Index in column 2 of Table 1.

For a personal residence that falls within the description of a total loss in section 3.05(1) of this revenue procedure, use Table 1 as follows:

(1) Determine the total square footage of the personal residence.

(2) Determine the size of the personal residence based on the total square footage described in Table 1.

(3) Multiply the total square footage of the personal residence (from step 1) by the

Table 2 - Near Total Loss

Cost Indexes – Near Total Loss

applicable cost index in column 2 of Table 2.

For a personal residence that falls within the description of a near total loss in section 3.05(2) of this revenue procedure, use Table 2 as follows:

(1) Determine the total square footage of the personal residence.

(2) Determine the size of the personal residence based on the total square footage described in Table 2.

(3) Multiply the total square footage of the personal residence (from step 1) by the

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Table 3 - Interior Flooding Over 1 Foot

Cost Indexes – Interior Flooding Over 1 Foot

(3) Determine the square footage of the flooded area of the personal residence.

(4) Multiply the flooded square footage (from step 3) by the applicable cost index in column 2 of Table 3.

The cost indexes in Table 3 are applied only to the square footage of the personal residence that was flooded, rather than the total square footage.

For a personal residence that was flooded by salt water (including brackish water) to a height of greater than 1 foot, as described in section 3.05(3) of this revenue procedure, and does not fall

within the description of a total loss or near total loss in sections 3.05(1) and (2) of this revenue procedure, use Table 3 as follows:

(1) Determine the total square footage of the personal residence.

(2) Determine the size of the personal residence based on the total square footage described in Table 3.

Table 4 - Structural Damage From Wind, Rain, or Debris

damaged by dividing the square footage that was damaged (from step 2) by the total square footage (from step 1).

(4) Multiply the square footage of the damaged area (from step 2) by the applicable cost index in column 2 of Table 4 (based on the percent of damage range in column 1 of Table 4).

The cost indexes in Table 4 apply only to the square footage of the damaged area of the personal residence, rather than the total square footage. Personal residences that sustained 100% wind, rain, or debris damage are those that sustained major structural damage throughout the entire personal residence necessitating substantial renovation (as defined in section 3.05(4) of this revenue procedure) of all of the rooms in the personal residence.

For a personal residence that sustained structural damage from wind, rain, or debris, use Table 4 as follows:

(1) Determine the total square footage of the personal residence.

(2) Determine the square footage of the damaged portion of the personal residence by adding the square footage of each room needing substantial renovation.

(3) Determine the percent of square footage of the personal residence that was

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Table 5 - Roof Covering Damage From Wind, Rain, or Debris

Cost Indexes – Roof Covering Damage
From Wind, Rain, or Debris

total square footage of the personal residence.

(4) Multiply the total square footage under the roof (from step 2) by the applicable cost index in column 2 of Table 5 (from step 3).

If the personal residence sustained roof covering damage from wind, rain, or debris as described in section 3.05(5) of this revenue procedure, apply the applicable cost index in Table 5 to the total square footage under the roof (including the porch, patios, and overhangs).

For a personal residence that sustained roof covering damage from wind, rain, or debris, as described in section 3.05(5) of this revenue procedure, use Table 5 as follows:

(1) Determine the total square footage of the ground floor of the personal residence.

(2) Add to the total square footage of the ground floor (from step 1) the square footage of any area of the roof that extends beyond the ground floor, such as porches and attached carports, to determine the total square footage under the roof.

(3) Determine the applicable cost index in column 2 of Table 5 based on the

Table 6 - Detached Structures

Cost Indexes – Detached Structures

(3) Multiply the total square footage of the detached structure (from step 1) by the applicable cost index in column 2 of Table 6.

For a detached structure on personaluse residential real property, as described in section 3.05(6) of this revenue procedure, apply the applicable cost index in Table 6 as follows:

(1) Determine the total square footage of the detached structure.

(2) Determine the size of the detached structure based on the total square footage described in column 1 of Table 6.

Table 7 - Wood Decking

Cost Index – Wood Decking

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For pressure treated wood decking attached to a personal residence, as described in section 3.05(7) of this revenue procedure, apply the cost index in Table 7 as follows:

(1) Determine the square footage of the damaged area of the deck.

(2) Multiply the square footage of the damaged area of the deck (from step 1) by the cost index in column 2 of Table 7.