Updated October 18, 2026. Quick answer: Section C of Form 4684 is an optional computation for a theft loss from a Ponzi-type investment scheme, lines 40 to 51. Section D, lines 52 to 57, is a statement electing to deduct a federally declared disaster loss in the preceding tax year, or revoking that election. Line 51 of Section C goes to line 28 of Section B.
What this part is for
Section C is headed “Complete this section in lieu of Appendix A in Revenue Procedure 2009-20.” The instructions give the condition: “If you meet both conditions, fill out Section C in lieu of Appendix A in Revenue Procedure 2009-20.” The two conditions are that “You qualify to use Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58.” and “You choose to follow the procedures in the guidance.”
Section D has its own purpose: “Use Section D to elect (or revoke an election) to deduct in the immediately preceding tax year a loss that was attributable to a federally declared disaster and occurred in a federally declared disaster area.” The broader rules for individuals are at casualty losses after the 2017 tax law, and the whole form is introduced at Form 4684.
The lines, one by one
Section C, Part I, Computation of Deduction:
| Line | What the form says |
|---|---|
| Line 40 | “Initial investment” |
| Line 41 | “Subsequent investments (see instructions)” |
| Line 42 | “Income reported on your tax returns for tax years prior to the discovery year (see instructions)” |
| Line 43 | “Add lines 40, 41, and 42” |
| Line 44 | “Withdrawals for all years (see instructions)” |
| Line 45 | “Subtract line 44 from line 43. This is your total qualified investment” |
| Line 46 | “Enter 0.95 (95%) if you have no potential” third-party recovery. “Enter 0.75 (75%) if you have potential” third-party recovery. |
| Line 47 | “Multiply line 46 by line 45” |
| Line 48 | “Actual recovery” |
| Line 49 | “Potential insurance/Securities Investor Protection Corporation (SIPC) recovery” |
| Line 50 | “Add lines 48 and 49. This is your total recovery” |
| Line 51 | “Subtract line 50 from line 47. This is your deductible theft loss. Include this amount on line 28 of Section B, Part I.” |
Section D, Parts I and II, the election statement and the revocation:
| Line | What the form says |
|---|---|
| Line 52 | “Provide the name or a description of the federally declared disaster.” |
| Line 53 | “Provide the date or dates (mm/dd/yyyy) of the loss or losses attributable to the federally declared disaster.” |
| Line 54 | “Specify the address, including the city or town, county or parish, state, and ZIP code where the damaged or destroyed property was located at the time of the disaster.” |
| Line 55 | “Provide the name or a description of the federally declared disaster and the address of the property that was damaged or destroyed” |
| Line 56 | “Specify the date (mm/dd/yyyy) you filed the prior election, which you are now revoking.” |
| Line 57 | “Enclose your payment or otherwise provide evidence for, or explanation of, your arrangements for the repayment of the amount of any credit or refund which you received and which resulted from the prior election” |
Section C Part II is a list of statements and declarations to read on your own form. The instructions say “Read the statements and declarations in this part carefully.”
Where the number comes from
Line 40: “Enter the initial amount of cash or basis of property that you invested in the investment arrangement.” Line 41: “that you invested after you made the initial investment (including amounts reinvested).”
Line 44: “Enter the total amount of cash or property that you withdrew from the investment arrangement in all years (whether designated as income or principal).”
Line 45: “This is the amount of your investment that is eligible for a deduction before any actual or potential recoveries are taken into account.”
Line 48: “Enter the amounts you actually received as a reimbursement or recovery from any source.” Line 49: “Enter the amount of potential insurance/SIPC recovery (defined earlier).”
The percentage in line 46 depends on recovery, as the form’s own text shows, and the instructions define the terms. Read the definition under Line 46 in your own instructions.
Where it goes next
Section C: “Enter the amount from line 51 on line 28 of Section B.” “Then complete Section B, Part II.” See Form 4684 Section B, Part I and Form 4684 Section B, Part II.
Section D, Part I: “Attach Section D to your original return or amended return for the tax year immediately preceding the tax year the loss was sustained” For Part II: “Attach Section D to your amended return for the tax year immediately preceding the tax year the loss was sustained to revoke the previous disaster loss deduction.”
A worked example
Illustration, not an IRS example. Suppose the 0.95 entry applies on line 46. All inputs are invented.
| Item | Illustration |
|---|---|
| Line 40 | $50,000 (invented, for the computation) |
| Line 41 | $10,000 (invented, for the computation) |
| Line 42 | $5,000 (invented, for the computation) |
| Line 43: lines 40 plus 41 plus 42 | $65,000 (computed) |
| Line 44 | $15,000 (invented, for the computation) |
| Line 45: line 43 minus line 44 | $50,000 (computed) |
| Line 46 (the 0.95 entry) | 0.95 |
| Line 47: line 46 x line 45 | $47,500 (computed) |
| Line 48 | $4,000 (invented, for the computation) |
| Line 49 | $1,000 (invented, for the computation) |
| Line 50: lines 48 plus 49 | $5,000 (computed) |
| Line 51: line 47 minus line 50 | $42,500 (computed) |
Line 43 is 50,000 + 10,000 + 5,000 = 65,000, line 45 is 65,000 minus 15,000 = 50,000, line 47 is 0.95 x 50,000 = 47,500, line 50 is 4,000 + 1,000 = 5,000, and line 51 is 47,500 minus 5,000 = 42,500.
Edition and line numbers
This page reads Form 4684 for 2025 and its 2025 instructions, the current files irs.gov served on 2026-10-18. Check the edition printed on your own form and use that edition’s line numbers.
Common mistakes
- Using Section C without meeting the conditions. The instructions say “Don’t fill out Section C if you don’t qualify to use the procedures in Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, or you don’t choose to follow them.”
- Filling out Section B lines 19 through 27 for the same loss. The instructions say “Don’t complete lines 19 through 27 for this loss.”
- Forgetting what the election commits you to. The instructions say “By making this election, you agree not to deduct the loss for the disaster year.”
Related: Form 4684, casualty losses after the 2017 tax law, Schedule A (Form 1040), and Schedule 1 (Form 1040).
Sources
- Form 4684 (2025), Casualties and Thefts: https://www.irs.gov/pub/irs-pdf/f4684.pdf
- 2025 Instructions for Form 4684: https://www.irs.gov/pub/irs-pdf/i4684.pdf
- IRS: About Form 4684: https://www.irs.gov/forms-pubs/about-form-4684
Read from the IRS documents linked above on October 18, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.