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loss to be deductible, the loss must be evidenced by closed and
completed transactions, fixed by an identifiable event, and
actually sustained during the taxable period year. See sec.
1.165-1(b), Income Tax Regs. Case law has defined the term
“casualty” to include an event that is “due to some sudden,
unexpected, or unusual cause” similar in nature to a fire, storm,
or shipwreck. Matheson v. Commissioner, 54 F.2d 537, 539 (2d
Cir. 1931), affg. 18 B.T.A. 674 (1930); see Rosenberg v.
Commissioner, 198 F.2d 46, 49 (8th Cir. 1952), revg. 16 T.C. 1360
(1951).
Petitioner testified that his $6,905 casualty and theft
loss deduction was for damages sustained to his personal and
business properties from raccoons, birds, vandals, and thieves.
On his Form 4684, petitioner represented that the storage shed
was “built of wood material with a 1 foot high opening all along
the wall” below the roof and that he had insisted that the owner
close the opening of the wall, but the owner never did.
Petitioner testified that some of the damage was due to vandals
in either 2000 or 2001. With respect to the vandalism, the
damages were not sustained in the 2002 taxable year; therefore,
they are not deductible.
Generally, a loss arising from theft is treated as sustained
“during the taxable year in which the taxpayer discovers such
loss.” See sec. 165(e); secs. 1.165-1(d)(3), 1.165-8(a)(2),
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Last modified: November 10, 2007