- 7 - A. Casualty Losses Pursuant to section 165(a) and (c)(3), a taxpayer is allowed a deduction for an uncompensated loss that arises from fire, storm, shipwreck, or other casualty. Section 165(h), however, states that any “loss * * * shall be allowed only to the extent that the amount of the loss to such individual arising from each casualty * * * exceeds $100” and only to the extent that the net casualty loss “exceeds 10 percent of the adjusted gross income”. When property is damaged rather than totally destroyed by casualty, the proper measure of the amount of the loss sustained is the difference between the fair market value of the property immediately before and after the casualty, not to exceed the property’s adjusted basis. See sec. 1.165-7(b)(1), Income Tax Regs. The fair market values required by the Treasury regulations must generally be ascertained by competent appraisal. See sec. 1.165-7(a)(2)(i), Income Tax Regs. As an alternative, the Treasury regulations provide that if the taxpayer has repaired the property damage resulting from the casualty, the taxpayer may use the cost of repairs to prove the casualty loss. See sec. 1.165-7(a)(2)(ii), Income Tax Regs. In general, estimates of the cost of repairs are not evidence of the actual costs of repairs unless the repairs are actually made. See Lamphere v. Commissioner, 70 T.C. 391, 396 (1978); Farber v. Commissioner, 57 T.C. 714, 719 (1972).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011