- 3 - These insurance proceeds were reinvested in the reconstruction of the apartment buildings. Additionally petitioners invested $483,000 in the reconstruction of the damaged apartments. On their income tax return for 1994 the petitioners claimed a casualty loss of $455,720. This loss was calculated by subtracting an after casualty fair market value of $1,544,280 from a precasualty fair market value of $2 million. Discussion Respondent determined that petitioners are not entitled to the casualty loss claimed on their 1994 Federal income tax return because petitioners’ adjusted basis in the property was less than the insurance proceeds received by petitioners for the loss. Petitioners argue that since the insurance proceeds were reinvested in qualifying property under section 1033 the full amount of the economic loss should be deductible. Petitioners calculate their loss as follows: Fair market value prior to casualty $2,000,000 Fair market value after casualty -750,000 Gross casualty loss 1,250,000 Less insurance proceeds -767,000 Net casualty loss 483,000 (Casualty loss less than basis) Section 165 provides for the deduction of a loss and in pertinent part provides:Page: Previous 1 2 3 4 5 Next
Last modified: May 25, 2011