Casualties And Thefts; How To Recover Some of Your Losses – Part II

What is Not a Casualty/Theft –

Things that do not by their nature qualify as a casualty generally do not satisfy the “sudden, unexpected, and unusual” requirement. These include but are not limited to:

1. Accidental breakage under normal conditions

2. Damage due to a family pet (Dyer v. Comm’r, T.C. Memo. 1961-141)

3. Any act of willful damage by the taxpayer or someone on behalf of the taxpayer.

4. Damage due to poor construction issues that are the underlying cause of the damage due to a sudden, unexpected or unusual event. (Portman v. U.S., 683 F.2d 1280 (9th Cir. 1982)).

5. Progressive deterioration due to normal wear and tear, normal weather conditions, drought, moth damage, termite damage, dry rot, death of trees or landscaping due to fungus, insects, or disease, and death of livestock from disease.

Things that do not qualify as a theft loss are as follows:

1. Loss of money or property by misplacement or disappearance not attributable to an identifiable event.

2. Loss due to willful negligence or gross negligence on the part of the taxpayer.

3. Loss due to any criminal activity involving the taxpayer as a participant.

4. Loss due to a valid investment other then a Ponzi Scheme. We will talk about Ponzi Schemes later in this series. The taxpayer may not take a theft loss, but, they may be able to take a capital loss on the Schedule D.

5. Loss due to a bankruptcy of a debtor of the taxpayers. However, the taxpayer may be able to take a bad business debt or bad non-business debt deduction.

As you can see, the IRS has a different definition of what can be claimed as a casualty or theft then your insurance company may have. The progressive damage comes into play, for example, when there are storms that will push that progressive roof wear and tear over the line into needing a new roof on a building.

Next up, Presidential Disaster Areas and Types of Property.

In accordance with Circular 230 Disclosure

Anything and everything taxes. I also write the Louisiana State book to go to our new Income Tax Course learners and the state-wide training for upper level Tax Professionals. I am an Instructor of all levels of tax related classes. I love to teach and write as well as taking the absolute best care of my clients all year round.

26 years in Law Enforcement (13 in the Air Force and 13 at the Bossier City PD), 20 years doing income taxes professionally.
My goals now are to spend many years being my 3 grandchildren’s MeeMaw, taking the absolute best care of my clients, and continually learning new things.
Taxes! I specialize in military, states, small business, and rentals.
The postings made on this site are my own and do not necessarily represent HR Block’s positions, strategies or opinions.

Facebook Twitter LinkedIn 

Subscribe to TaxConnections Blog

Enter your email address to subscribe to this blog and receive notifications of new posts by email.