- 3 - Petitioners did not receive any compensation or insurance payments for the loss. On their joint income tax return for 1997, petitioners claimed a $44,000 casualty loss due to the destruction of the barn. The $44,000 loss was computed on their Form 4684, Casualties and Thefts, by subtracting the estimated value of the lumber, $2,000, from the value of the barn before the casualty, which petitioner claimed to be $46,000. In the notice of deficiency, the Internal Revenue Service (IRS) allowed petitioners a casualty loss of $500. At trial of this case, respondent conceded that petitioners should be allowed a deduction of $1,350 for the loss of the barn. OPINION The amount of a casualty loss deduction is generally computed as the excess of the fair market value of the property immediately before the casualty over the fair market value of the property immediately after the casualty, limited by the adjusted basis of the property. Helvering v. Owens, 305 U.S. 468 (1939); Millsap v. Commissioner, 46 T.C. 751 (1966), affd. 387 F.2d 420 (8th Cir. 1968); sec. 1.165-7(b)(1), Income Tax Regs. These respective values “shall generally be ascertained by competent appraisal.” Sec. 1.165-7(a)(2)(i), Income Tax Regs. The parties agree that petitioners sustained a casualty loss within the meaning of section 165(c)(2). That section statesPage: Previous 1 2 3 4 5 6 Next
Last modified: May 25, 2011