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(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
�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).
(2) Aggregation of property for
computing loss. (i) A loss incurred in a
trade or business or in any transaction
entered into for profit shall be determined
under subparagraph (1) of this paragraph by
reference to the single, identifiable
property damaged or destroyed. Thus, for
example, in determining the fair market value
of the property before and after the casualty
in a case where damage by casualty has
occurred to a building and ornamental or
fruit trees used in a trade or business, the
decrease in value shall be measured by taking
the building and trees into account
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Last modified: May 25, 2011