IRS announces qualified disaster treatment for Chile
by AccountingWEB on
The Internal Revenue Service this week issued guidance designating the February earthquake in Chile as a qualified disaster for federal tax purposes.
The guidance allows individuals who receive qualified disaster relief payments from any person to exclude those payments from income on their tax returns. Also, the guidance allows employer-sponsored private foundations to assist employee-victims in areas affected by this earthquake without affecting their tax-exempt status.
Qualified disaster relief payments include amounts to cover necessary personal, family, living, or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance. Again, these payments would not be included in the individual recipient’s gross income.
Qualified disasters include presidentially declared disasters and any other event that the Secretary of the Treasury determines to be of a catastrophic nature. The IRS has determined that the earthquake that occurred in Chile in February 2010 is an event of a catastrophic nature for purposes of the federal tax law.
The IRS will presume that disaster relief that a private foundation provides to employee-victims and their family members in areas affected by the earthquake in Chile are consistent with the foundation's charitable purposes.