Record an asset lost to damage, theft, or condemnation, and decide whether to defer any gain into a replacement.
Where this is in the app
Dashboard → open the return → Assets tab → open the asset → Dispose → Disposition Kind → Casualty / theft (§165) or Involuntary conversion (§1033)
New to the disposal screen? Start at Record a disposal.
Two Disposition Kind options open the same step in two shapes:
Casualty / theft (§165) asks for reimbursement and salvage separately. Its step is headed "Casualty / theft — §165 (Form 4684, Section B)" and it closes with the line "Routes to Form 4684, Section B (§165)."
Involuntary conversion (§1033) asks for a single net award. Its step is headed "Involuntary conversion — §1033 condemnation (Form 4797 / §1231)" and closes with "Routes to Form 4797 (§1231)."
The step opens for a full-asset disposal that has not already been disposed. There is no property-type restriction. When it is open, the Record disposal button is replaced by a line reading "Complete the §165 casualty step below to record this disposition," or the §1033 condemnation equivalent.
Steps
Enter the amounts.
Decide on the §1033 election. When the amounts produce a gain, a checkbox appears reading Defer this gain under §1033, described underneath as:
Read the breakdown. The panel is headed §165 loss breakdown on a loss, or Gain, recapture & basis breakdown on a gain. On a loss it shows the composition line by line: adjusted basis, less insurance / other reimbursement, less salvage proceeds, giving the loss.
Record the disposition. The button reads Record casualty disposition or Record condemnation disposition. With the §1033 election on and a gain it gains a suffix, reading Record casualty disposition & build replacement or Record §1033 disposition & build replacement.
Review and accept the replacement asset, if one is offered. See Build the replacement asset. The replacement is only offered when you elected §1033 on a gain.
Before you record, the step states which of the three outcomes it is about to write: the §1033 substituted basis it will build the replacement from, the gain recognized in full with no deferral, or the loss amount.
The timing caveat
With the §1033 election on, an amber banner headed §1033 replacement-period caveat appears after you record, above the mounted replacement preview. It says DepreciationPro computes the deferred gain and carryover basis but does not track the deadline or test qualification, and that your tax software or preparer owns the election and the clock. The same text appears on the Reports tab and in the Dispositions worksheet, so it never drifts from what you read at entry.
Scope
The step covers business assets, which is what DepreciationPro tracks. Personal-use casualties are outside it.