SECTION 7. PERSONAL — Internal Revenue Bulletin 2006-28

BELONGINGS SAFE HARBOR METHOD

.01 Certain personal belongings . Except as provided in section 7.02 of this revenue procedure, an individual may use the safe harbor method in this section 7.01 to determine the fair market value of the individual’s personal belongings immediately before a 2005 Gulf hurricane in order to compute a casualty or theft loss. If an individual chooses to use the Personal Belongings Safe Harbor Method, the individual must apply that method to all personal belongings for which a loss is claimed under § 165 except those specifically excluded in section 7.02 of this revenue procedure.

To use this safe harbor method, an individual must first determine the current cost to replace the personal belonging with a new one and reduce that amount by 10% for each year the individual owned the personal belonging using the percentages in the Personal Belongings Valuation Table below. If the personal belonging was owned by the individual for nine or more years, the pre-hurricane fair market value is 10% of the current replacement cost under this safe harbor method.

2006–28 I.R.B. 70 July 10, 2006

Personal Belongings Valuation Table

Year	Percentage of Replacement Cost to Use
1	90%
2	80%
3	70%
4	60%
5	50%
6	40%
7	30%
8	20%
9+	10%

To determine the casualty or theft loss deduction for personal belongings that were damaged, destroyed or stolen:

(1) Determine the decrease in the fair market value of each personal belonging by subtracting the fair market value of the personal belonging immediately after the hurricane from the fair market value of the personal belonging immediately before the hurricane, determined as described above. If a personal belonging was destroyed or stolen as a result of a 2005 Gulf hurricane its fair market value after the hurricane is zero.

(2) Determine the basis of each of the personal belongings (generally its cost).

(3) Compare the decrease in fair market value (from step 1) to the basis of the personal belonging (from step 2). From the lesser of the basis or decrease in fair market value, subtract any insurance or other reimbursements the individual receives or expects to receive for the personal belonging.

.02 Exclusions . An individual may not use the Personal Belongings Safe Harbor Method for a boat, aircraft, mobile home, trailer, vehicle, or an antique or other asset that maintains or increases its value over time. For purposes of this revenue procedure, a vehicle is an automobile, motorcycle, motor home, recreational vehicle, sport utility vehicle, off-road vehicle, van, or truck.

An individual may determine the prehurricane value of a boat, aircraft, mobile home, trailer, or vehicle by consulting established pricing sources. See Rev. Rul. 2002–67, 2002–2 C.B. 873.

.03 Example . An individual’s personal belongings included a chair destroyed by Hurricane Wilma within the Hurricane Wilma disaster area. The individual purchased the chair for $70 four years prior to Hurricane Wilma. The cost to replace the chair with a new chair is $100. The chair is not insured.

Using the Personal Belongings Safe Harbor Method, the individual computes the fair market value of the chair immediately before the hurricane by multiplying the current replacement cost of the chair, $100, by the applicable percentage of replacement cost from the Personal Belongings Valuation table, 60%:

$100 x 60% = $60

The individual determines the decrease in the fair market value of the chair by subtracting $0, the fair market value of the chair immediately after the hurricane, from $60, the fair market value of the chair immediately before the hurricane.

$60 - 0 = $60

The individual compares the basis of $70 to the decrease in fair market value of $60. Since the decrease in fair market value is less than the basis, the individual is entitled to a casualty loss deduction of $60.