Issue link: http://winesandvines.uberflip.com/i/383377
W i n e s & V i n e s O C T O B e R 2 0 1 4 17 S E P T E M B E R N E W S b y t h e i n d u s t r y f o r t h e i n d u s t r y 2 0 1 5 January 27 – 29, 2015 exhibits: January 28 & 29 Sacramento Convention Center Sacramento, California U N I F I E D W I N E & G R A P E S Y M P O S I U M Registration and Housing open in October. Check our website for details as they become available. www.unifedsymposium.org one place, one time, all the answers— the Unifed! O C T O B E R N E W S McMillan's other observations: • 60% of Napa County wineries sustained some degree of damage, and up to 25% of wineries suffered moderate to severe damage exceeding $50,000 per winery, ranging up toward $8 million in the most devastating circumstance. • The majority of the damage was in the south- ern and western parts of the county, as well as business operations in the city of Napa. • Businesses supporting warehousing and shipping at the epicenter experienced sig- nificantly lower damage than would be ex- pected, likely due to newer building codes and the preparedness of the operators. • Wineries in the Carneros region, Mt. Veeder, Yountville and Oak Knoll areas suffered the greatest damage. • Custom-crush wineries experienced outsized losses, which may necessitate additional review of earthquake and safety protocols in such operations. Most wineries don't have earthquake insur- ance for their buildings, but many do insure their inventory. Earthquake insurance special- ist Debra Costa, vice president at Heffernan Insurance Brokers in Petaluma, Calif., said, "The majority of our clients have coverage on their inventory, as we recommend due to the risk in California." She noted, "Wineries can insure inventory and finished goods at very competitive rates." Inventory includes the barrels as well as the wine, but not tanks. The cost is about 10 to 15 cents per $100 of value. "The catch is that the deductibles start out at $100,000." Structures, on the other hand, might cost 20 to 30 cents per $100 of value, but the deduct- ible is typically 10% of the total value. She notes that she's seeing more interest in quake insurance after this one, particularly for tanks, which can be insured separately. "Many tanks were compromised," she added. Risk Management Solutions estimates that the insured loss from the south Napa earthquake will not exceed $250 million, within its expectations for its magnitude and location. It said, "The rela- tively low impact to the insurance industry re- flects the combination of the moderate magnitude and location of the earthquake, the limited earth- quake insurance penetration in the region, and the resiliency of the Napa winery industry." It added that the primary damage was due to ground shaking with minimal observations of fire following earthquake or earthquake sprinkler leakage. "Little liquefaction or lateral spreading was observed, while damage to transportation networks (i.e., roads and bridges) was minimal and repaired quickly." PricewaterhouseCoopers, a leading account- ing firm in the wine business, sent out a memo on deducting losses. "Due to the high deduct- ibles and costly earthquake insurance plans, events like this earthquake may result in tax- payers incurring extraordinary expenses that may not be covered by or fully reimbursed by insurance. Fortunately, however, Section 165 of the Internal Revenue Code may help to lessen the burden by allowing taxpayers a de- duction for casualty and disaster losses." In general, it provides a deduction for any loss that is sustained during the taxable year and not compensated for by insurance or otherwise. To be an allowable deduction, the regulations pro- vide that the loss must be evidenced by a closed and completed transaction, fixed by an identifi- able event, and actually sustained during the taxable year. Only a bona fide loss (i.e., a real economic loss) is allowable. In the case losses incurred in a federally declared disaster area, Section 165(i) provides a special rule that may allow a taxpayer to deduct the loss in the taxable year immediately preceding the taxable year in which the loss actually occurred. —Paul Franson (Continued from page 15.)