SECTION 3. SCOPE

.01 In general . An individual with a U.S. income tax filing requirement who suffered a casualty loss to the individual’s personal-use residential real property located in the 2017 Disaster Area as a result of the 2017 Hurricanes may use the safe harbor method provided in this revenue procedure in determining the amount of the individual’s casualty loss under § 165. The term “2017 Disaster Area” means the entire states of Texas, Louisiana, Florida, Georgia, and South Carolina, the Commonwealth of Puerto Rico, and the territory of the U.S. Virgin Islands. This revenue procedure applies to bona fide residents of Puerto Rico and the U.S. Virgin Islands only where these individuals otherwise have a U.S. income tax filing requirement.

.02 Definition of personal-use residen- tial real property and personal residence . For purposes of this revenue procedure, personal-use residential real property is real property, including improvements (such as buildings and ornamental trees and shrubbery), that is owned by the individual who suffered a casualty loss and that contains at least one personal residence. Personal-use residential real property does not include a personal residence if any part of the personal residence is used as rental property or contains a home office used in a trade or business or transaction entered into for profit. For purposes of this revenue procedure, a personal residence is a single family residence, or a single unit within a contiguous group of attached residential units (for example, a townhouse or duplex), owned by the individual who suffered a casualty loss, and consists of the total enclosed square footage of the residence or single unit, including any enclosed structures attached to the residence or single unit. For example, a personal residence includes a basement and an attached garage, but does not include a deck or screened-in porch. For purposes of this revenue procedure, a personal residence does not include a condo

January 8, 2018 292 Bulletin No. 2018–2

minium or cooperative unit, or any other property for which the individual who suffered the casualty loss does not own the structural components of the building (such as the foundation, walls, and roof), or owns only a fractional interest in all of the structural components of the building, or a mobile home or trailer.

.03 Use of Cost Indexes Safe Harbor Method . An individual described in section 3.01 of this revenue procedure may use the Cost Indexes Safe Harbor Method if the individual’s personal-use residential real property has suffered, in the circumstances described below, (1) a total loss of a personal residence, (2) a near total loss of a personal residence, (3) interior flooding over 1 foot of a personal residence, (4) structural damage from wind, rain, or debris to a personal residence, (5) roof covering damage from wind, rain, or debris to a personal residence, (6) damage to a detached structure, or (7) damage to decking:

(1) Total loss . A total loss of a personal residence occurs if, as a result of one of the 2017 Hurricanes, any one of the following occurred:

(a) The personal residence either collapsed or is structurally unsound (for example, the structural connections in the personal residence, such as nails and anchor bolts, have corroded as a result of prolonged exposure to water over an extended period of time to the extent that they compromise the structural integrity of the personal residence);

(b) The state or local government or any political subdivision thereof has ordered that the personal residence be demolished or relocated;

(c) The individual has sold the personal residence to an unrelated party for a price that reflects the fair market value solely of the land on which the personal residence is situated; or

(d) The personal residence sustained damage that satisfies the definition of near total loss, as described in section 3.03(2) of this revenue procedure, and the individual has demolished the personal residence.

(2) Near total loss . The near total loss of a personal residence occurs if, as a result of one or more of the 2017 Hurricanes, the personal residence sustained severe damage necessitating the removal and disposal of substantially all interior wall frame cover

ings (including drywall and other wall frame coverings), floorings, electrical lines, ducts, plumbing, and other fixtures. For a personal residence sustaining near total loss, only the wood frame, rafters, and outside façade of the personal residence remain structurally sound and reusable.

(3) Interior flooding over 1 foot . Interior flooding over 1 foot occurs if a personal residence was flooded with water to a height of more than 1 foot as a result of one or more of the 2017 Hurricanes, but did not sustain damage that falls within the definition of total loss or near total loss, as described in sections 3.03(1) and (2) of this revenue procedure.

(4) Structural damage from wind, rain, or debris . Structural damage from wind, rain, or debris occurs if a personal residence sustained major structural damage to the roof and/or outside wall(s) as a result of wind or windblown debris from one or more of the 2017 Hurricanes that exposed part or all of the interior of the personal residence to rain or debris, requiring substantial renovation of the damaged areas. Substantial renovation requires the removal and replacement of drywall or other wall frame coverings, replacement of trim, and repair and painting of the damaged interior areas of the personal residence.

(5) Roof covering damage from wind, rain, or debris . Roof covering damage from wind, rain, or debris occurs if a personal residence sustains damage from wind, rain, or windblown debris to roofing felt, shingles, flashings, fascia, or soffit as a result of one or more of the 2017 Hurricanes.

(6) Damage to a detached structure . Damage to a detached structure occurs if, as a result of one or more of the 2017 Hurricanes, the detached structure requires either complete or major rebuilding. A detached structure is an enclosed structure of woodframe construction that has some electrical capabilities, but little or no interior finishing. A detached structure is located on personaluse residential real property and includes a shed, shop, or detached garage that is not used in connection with a trade or business and that is not equipped with heating or air conditioning.

(7) Damage to decking . Damage to decking occurs if, as a result of one or more of the 2017 Hurricanes, the decking attached to a personal residence was damaged or destroyed.

.04 Taking into account no-cost re- pairs . An individual using the Cost Indexes Safe Harbor Method described in section 4 of this revenue procedure must take into account the value of any no-cost repairs as described in section 6 of this revenue procedure.

.05 Limited use of safe harbor method . The safe harbor method described in section 4 is available only in the circumstances described in this revenue procedure.