Guide for Accounting and Bookkeeping Staff at Wineries Impacted by Fires Nature of Item Special Treatment

Guide for Accounting and Bookkeeping Staff at Wineries Impacted by Fires

Napa and Sonoma Counties have been declared eligible for Federal Disaster Relief. As a result, numerous tax filing deadlines have been extended. In addition, if your winery has suffered direct or incidental losses, you have some options about when these losses can be applied.

In this document, we have gathered information about how to keep track of transactions related to restoring your winery back to its full operating condition. These suggestions are designed to make it easier to seek and receive both reimbursement for losses and favorable tax treatment.

Nature of Item Special Treatment Impact on Accounting Damage to Vines Need to establish value of Document via photos and loss testing, etc Removing Damaged Vines Replacement costs, Keep track of these costs versus Future Planting deferred gains separately. Loss/ Damage of Property Deductible as casualty Gather evidence of pre‐ loss and post‐damage value Disposal of damaged Must be removed by end business property of tax year (generally 12/31/17) to take a deduction this year Repairs versus Write‐offs Keep repair costs separate from any costs associated with disposing of an item. Also separate costs of upgrades in repaired item. Leased property Must show evidence of contractual liability for the loss Fixed Asset Replacement Special gain deferral is Keep track of these items available for tax purposes separately. if replaced with similar items.

www.bdcocpa.com Page 1 707‐963‐4466 Insurance Proceeds Gain may not be taxable Track proceeds if reinvested in similar separately. property. Business Interruption May be covered under Will need to provide insurance policies information to substantiate the amount of the loss – usually monthly P&L’s, tax returns, etc but varies based on the specifics of your insurance policy. Winemaker’s time spent Deducted as part of the Track these hours on recovery issues casualty loss separately from normal winemaking activities Damaged Bulk or Bottled Valuing lost inventory – • Take inventory and get an accurate count of what Wine Inventory negotiate with insurance has been damaged or company destroyed. • Be sure to dispose of any damaged items by the end of your 2017 tax year in order to deduct those losses this year • Also review the impact on any loan covenants that were based on Inventory on hand. If insurance proceeds are Basis of new wine is greater than cost of wine, reduced by deferred gain gain can be deferred via if replaced within 2 years. inventory. Replacement of critical Order tax documents at CPA firm can also provide documents and records no charge if due to electronic versions of disaster income tax returns. Tax Returns and Certain See article on Have been extended to Tax payments www.bdcocpa.com 1/31/2018.