SECTION 6. REDUCTION FOR

NO-COST REPAIRS

Under § 165(a), a casualty loss must be reduced by insurance or other amounts received, such as amounts given to an individual to repair the damage to the individual’s property due to the casualty. This includes the value of repairs to, or rebuilding of, the individual’s personaluse residential real property provided by another party at no cost to the individual (“no-cost repairs”), such as the repair or rebuilding of an individual’s personal residence by volunteers. No-cost repairs include repairs made for a de minimis or token cost, donation, or gratuity.

An individual who uses the Cost Indexes Safe Harbor Method provided in section 4 of this revenue procedure to determine the decrease in the fair market value of the individual’s personal-use residential real property must reduce the loss, determined using the Cost Indexes Safe Harbor Method, by the value of any nocost repairs. For this purpose, the value of a no-cost repair is based upon the total square footage completely repaired at no cost to the individual. The total square

footage completely repaired at no cost to the individual is multiplied by the same cost index the individual used to determine the decrease in the fair market value of the individual’s personal-use residential real property. This amount is then subtracted from the loss determined under the Cost Indexes Safe Harbor Method.