Question

H is a private detective, while sleuthing this year, his car was stolen. The car which was used entirely for business, was worth $7000 and had an adjusted basis of $12,000. H received no insurance reimbursement for his car. Also this year, his office office was the victim of arson. The fire destroyed only a painting that had a basis of $1,500 and was worth $3000. He received $800 from his insurance company for the painting. H suffered yet another misfortune this year as his rental property was damaged by a flood, the first in the area in 70 years. Before the casualty, the property- which had greatly appreciated in value-was worth $90,000, and afterward was only $40,000. The rental property had an adjusted basis of $30,000. He received $20,000 from the insurance company, the maximum amount for which homes in a flood plain could be insured. Compute H's casualty loss deduction assuming his AGI is $30,000. Can a casualty loss create a net operating loss ?

Answer 1

As per the Federal Tax rules a person can claim Casualty & Theft Loss

A casualty loss can result from the damage, destruction, or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake, or volcanic eruption.

Theft Loss A theft is the taking and removal of money or property with the intent to deprive the person owing it. It must be illegal under the law and occurred with criminal intent.

In this Case H's Losses falls in above definition of casualty loss & theft Loss

statement showing H's Casualty Loss Deduction

Particulars	adjusted Basic(1)	Insurance value (2)	Fair Value(3)	Current Value(4)	5=(3-4)	(6 )lower value of point 5&1	final value (6-2)
car	$12000	0	0	0	0	$12000	$12000
Painting	$1500	$800	3000	0	3000	$1500	$700
rental property	$30000	$20000	$90000	$40000	$50000	$30000	$10000
total deduction							$22700

AGI =$30000

Casualty loss =$22700

Taxable income =$7300

no casualty loss is not creating net operating loss for H detective