Gary L. Lonsinger and Nancy L. Lonsinger - Page 8

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               The regulations provide the method for determining the                 
          amount deductible.  Section 1.165-7(b)(1), Income Tax Regs.,                
          provides:                                                                   
                    (b)  Amount deductible--(1) General rule.  In the                 
               case of any casualty loss whether or not incurred in a                 
               trade or business or in any transaction entered into                   
               for profit, the amount of loss to be taken into account                
               for purposes of section 165(a) shall be the lesser of                  
               either--                                                               
                         (i)  The amount which is equal to the fair                   
               market value of the property immediately before the                    
               casualty reduced by the fair market value of the                       
               property immediately after the casualty; or                            
                         (ii)  The amount of the adjusted basis                       
               prescribed in sec. 1.1011-1 for determining the loss                   
               from the sale or other disposition of the property                     
               involved.  However, if the property used in a trade or                 
               business or held for the production of income is                       
               totally destroyed by casualty, and if the fair market                  
               value of such property immediately before the casualty                 
               is less than the adjusted basis of such property, the                  
               amount of the adjusted basis of such property shall be                 
               treated as the amount of the loss for purposes of                      
               section 165(a).                                                        

          Fair market values are "generally" to be ascertained by                     
          "competent appraisal".  Sec. 1.165-7(a)(2)(i), Income Tax Regs.             
               Section 1.165-1(a), Income Tax Regs. (citing section 165(a))           
          provides that in computing taxable income under section 63, any             
          loss actually sustained during the taxable year and not made good           
          by insurance or some other form of compensation is allowable as a           
          deduction, subject to certain limitations not relevant here.                
          Section 1.165-1(d)(2)(i), Income Tax Regs., provides in general             
          that a casualty loss is not "sustained" before the year in which            




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