Taxpayers who have suffered losses related to their business property or income-producing property are also allowed to deduct these losses on their tax return. These losses are not subject to the same deduction limits as personal property (such as the 10% AGI rule and $100 rule), and can either be reported as an itemized deduction on their Schedule A if income producing property or as a direct loss on the first page of the 1040 return for business property.
When calculating the amount of the loss, the taxpayer should take the lesser of the following:
1) adjusted basis, or
2) decline in FMV.
If the property is totally destroyed, then the taxpayer must just take the adjusted basis of the property.