In Louisiana, storm damage is not a hypothetical planning topic. It is a recurring line item, and the businesses that handle it well are the ones that decided how to handle it before the water arrived.
Todd Muslow CPA works with closely held businesses in Shreveport, Louisiana, and across the region, where the accounting question follows the cleanup by a few weeks and finds most owners unprepared for what it requires.
The Deduction Is Smaller Than Owners Expect, and for a Reason
A business casualty loss is generally measured by the lesser of the decline in fair market value or the adjusted basis of the property, reduced by insurance and other reimbursement. For property destroyed entirely, adjusted basis governs.
That last part is what surprises people. A building fully depreciated over the years has little basis left, and a total loss on it produces little deduction no matter what the building was worth on the day the storm hit.
The insurance recovery cuts the other way. Proceeds exceeding basis can create a gain, which is a genuinely strange outcome to explain to an owner standing in a damaged facility. Todd Muslow CPA notes that this conversation goes better when it happens before the claim is settled.
Timing Has an Option Attached
Losses attributable to a federally declared disaster may be claimed on the return for the year of the loss or on the prior year’s return. That election is a real planning lever, not a formality.
The prior year may have had income the loss can offset immediately, producing cash now rather than a benefit next spring. Or the current year may be the better home for it. The answer depends on rates, other income, and what the business needs.
The election has a deadline and it is not the one owners assume. Missing it does not eliminate the deduction, though it removes the choice, and a choice removed in a year when a business is short on cash is a choice that mattered.
Deferring the Gain Rather Than Paying on It
When insurance proceeds exceed basis, the involuntary conversion rules allow gain to be deferred if the proceeds are reinvested in similar property within a defined replacement period. The period is extended for federally declared disasters.
This is the provision that keeps a rebuilding business from paying tax on money it is spending on the rebuild. Todd Muslow CPA points out that the deferral is not automatic. It requires an election and it requires that the replacement property actually qualify.
Owners lose this benefit by replacing with something different enough to fail the test, or by letting the period run while insurance negotiations drag. Both are avoidable with a calendar and a conversation.
The Records Are the Claim
Every element of a casualty loss rests on documentation that mostly has to exist before the event. Basis records. Depreciation schedules. Photographs. Appraisals. The insurance adjuster’s report and the settlement.
Cleanup and repair costs need to be separated from restoration costs that get capitalized. Business interruption proceeds are their own category with their own treatment and do not belong mixed into the property claim.
Todd Muslow CPA is a partner of Muslow+Agnew Group, LLC in Shreveport, Louisiana, serving closely held businesses in taxation, business accounting services, and consulting. He treats basis records and asset detail as disaster preparation, filed alongside the insurance policy rather than in a different drawer.
One more item belongs on the list. Todd Muslow CPA recommends confirming that the depreciation detail exists somewhere other than the accountant’s server and the owner’s office. Two copies in the same parish is one copy for practical purposes.
The businesses that recover fastest are not the ones with the best claims. They are the ones that could substantiate a claim in the first week rather than the sixth, because the substantiation was already sitting somewhere dry.
The storm is not the part you control. What you can control is whether the records survive it, and that decision gets made on an ordinary Tuesday long before the forecast turns.