Verta Hill - Page 11

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          the amount of the loss arising from each casualty exceeds $100.             
          Section 165(h)(2) provides that if the personal casualty losses             
          for a taxable year exceed the personal casualty gains for the               
          year, the losses are allowable only to the extent of the sum of             
          the personal casualty gains for that taxable year, plus so much             
          of the excess as exceeds 10 percent of adjusted gross income for            
          that taxable year.  Thus, where there are no personal casualty              
          gains for a taxable year, personal casualty losses (in excess of            
          $100 per casualty) are allowable to the extent that they exceed             
          10 percent of adjusted gross income for that taxable year.                  
               The method of valuation to be used in determining a casualty           
          loss is prescribed in section 1.165-7(a)(2), Income Tax Regs.,              
          which provides as follows:                                                  
               (i)  In determining the amount of loss deductible under * *            
               * [section 165], the fair market value of the property                 
               immediately before and immediately after the casualty shall            
               generally be ascertained by competent appraisal.  This                 
               appraisal must recognize the effects of any general market             
               decline affecting undamaged as well as damaged property                
               which may occur simultaneously with the casualty, in order             
               that any deduction under * * * [section 165] shall be                  
               limited to the actual loss resulting from damage to the                
               property.                                                              
               (ii)  The cost of repairs to the property damaged is                   
               acceptable as evidence of the loss of value if the taxpayer            
               shows that (a) the repairs are necessary to restore the                
               property to its condition immediately before the casualty,             
               (b) the amount spent for such repairs is not excessive, (c)            
               the repairs do not care for more than the damage suffered,             
               and (d) the value of the property after the repairs does not           
               as a result of the repairs exceed the value of the property            
               immediately before the casualty.                                       







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Last modified: May 25, 2011