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D. Result of Schedule C Adjustments Above
Consistent with the findings above, we have recalculated
petitioner’s Schedule C loss from PK Production. Petitioner is
entitled to a loss of $1,748.19 on Schedule C for the year at
issue. Petitioner’s adjusted gross income is also recomputed to
reflect this amount. Petitioner’s recomputed adjusted gross
income is $28,919.35 for the year at issue.
2. Casualty Loss Deduction
Section 165(a) allows a taxpayer to deduct any loss
sustained during the taxable year and not compensated for by
insurance or otherwise. As relevant here, section 165(c)(3)
allows a deduction to an individual for loss of “property not
connected with a trade or business or a transaction entered into
for profit, if such loss arises from fire, storm, shipwreck, or
other casualty”.
Pursuant to section 165(h), personal casualty losses
described under section 165(c)(3) are deductible only to the
extent that the loss exceeds $100 and 10 percent of the
taxpayer’s adjusted gross income. Moreover, such losses are
deductible as itemized deductions on Schedule A of the taxpayer’s
return.
Pursuant to section 1.165-7(b)(1), Income Tax Regs., in the
case of property partially destroyed by casualty, the loss
deductible for purposes of section 165(a) is the difference
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