Records destroyed in fire

[GERALD]

Long time clients lost home to fire. Beautiful 6000sf, paid for home, less than 10 years old , totally leveled. Despite attempts at sorting rubble, absolutely nothing salvaged. Site has been bulldozed. It happened 3 weeks ago. The wife operated a home based custom sewing (draperies, curtains, slip covers, etc ) business serving a high end clientele. The last 3 years sch C's show an average of 100k in sales, 50k net. She said 2007 was as good or better than previous years. Of course , all records were destroyed, so we have to reconstruct. Duplicate bank statements are only partially helpfull because about 30% of her receipts were in cash, which she then used to buy materials . She is a former bookkeeper and kept very detailed records of and reported all cash transactions, even down to nickle and dime stuff. She brought me her books every year to back up her income statement, so I know how accurate they were. Plus, she is just plain one of the most honest people I have ever known. We are meeting next week to reconstruct and file a 2007 return, with which we will attach a full explanation. I have even considered attaching copies of prior years' sch C's (marked DO NOT PROCESS) to show that this years is in line.

I just wanted to run this by the board to see what experience any of you might have had with the IRS in similar situations.

Gerald

[GeneInAlabama]

When I worked for the IRS way back in the 70's, we would take into consideration that things do happen. If a taxpayer appeared to be completely straight forward we would accept whatever they could provide if it was within reason. I don't think you will have any problem with the facts you have presented. I wouldn't send copies of the old schedule C's, but I would send a copy of the fire report and send an explanation of how you came up with the figures. Good luck.

Gene

[GERALD]

Thanks for the input, Gene.

Gerald

[Gail in Virginia]

Sad but true, one of our clients with extensive rental income from various properties and from self-storage business, lost her home in a fire about 3:00 yesterday morning. Before I can even ask for help on how to do this, here it is. I love this community!

[Booger]

When I worked for the IRS way back in the 70's, we would take into consideration that things do happen. If a taxpayer appeared to be completely straight forward we would accept whatever they could provide if it was within reason. I don't think you will have any problem with the facts you have presented. I wouldn't send copies of the old schedule C's, but I would send a copy of the fire report and send an explanation of how you came up with the figures. Good luck.

Gene

Gene, do you think the IRS will accept "My dog ate my records" as an excuse from a taxpayer?

Booger