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Casualty Loss Deduction
On his 2003 tax return, petitioner claimed a casualty loss
deduction in the amount of $27,927. This claimed loss deduction
resulted from a fire that severely damaged the Bronx Boulevard
house on February 25, 2003. Petitioner also deducted the loss of
his personal property that was inside the house at the time of
the fire.
Section 165(a) allows a deduction for any loss sustained
during the taxable year and not compensated for by insurance or
otherwise. For individuals, section 165(c)(3) allows a taxpayer
to deduct a loss from fire, storm, shipwreck, or other casualty,
or from theft. The deduction is only allowed to the extent the
loss exceeds $100 and the net casualty loss exceeds 10 percent of
the taxpayer’s adjusted gross income. Sec. 165(h). The amount
allowed as a deduction is the lesser of: (1) The difference
between the fair market value of the property immediately before
and immediately after the casualty; and (2) the adjusted basis in
the property. Helvering v. Owens, 305 U.S. 468 (1939); sec.
1.165-7(b), Income Tax Regs.
Inherent in section 165 is the requirement that to claim a
deduction for the loss of property, the taxpayer must have been
the owner of the property at the time of the loss. Draper v.
Commissioner, 15 T.C. 135 (1950); Miller v. Commissioner, T.C.
Memo. 1975-110. If the taxpayer is not the owner of the
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Last modified: November 10, 2007