Question

10-7 Casualty Losses. During the year, R had various losses. Explain whether each of the following would qualify as a casualty loss. Assume each occurred as a result of a federally declared disaster. a. Loss of stove due to electrical fire after a hurricane hit ground in Florida b. Damage to water pipes from a mudslide in Southern California c. Loss of tree from Dutch elm disease d. Ruined carpeting from clogged sewer line e. Television he dropped while moving it from his home that flooded Damage to both his and his neighbor's car while R’s son drove R's car g. The costs of cleaning up and repairing a home as a result of hurricane as well as cost of staying at hotel for over a month while the home was cleaned and repaired h. Luggage and contents seized by a foreign government at airport when evacu- ating from a foreign country after a terrorist attack

Answer 1

A casualty loss is a type of tax loss that is a sudden, unexpected, or unusual event. Damage or loss resulting from progressive deterioration of property through a steadily operating cause would not be a casualty loss. “Other casualty” are events similar to “fire, storm, or shipwreck.” It is generally held that wherever force is applied to property which the owner-taxpayer is either unaware of because of the hidden nature of such application or is powerless to act to prevent the same because of the suddenness thereof or some other disability and damage results.

a. Yes it is a casualty loss.

b. No. this is not a casualty loss.

c. No. this is not a casualty loss.

d. No. this is not a casualty loss.

e. Yes it is a casualty loss.

f  No. this is not a casualty loss.

g. Yes it is a casualty loss.

h. Yes it is a casualty loss.