Quick Reference for Tax Professionals ? Casualty and Theft Loss

Mar 25, 2015

Quick Reference for Tax Professionals ? Casualty and Theft Loss

Mar 25, 2015

Not much can ruin someone’s day faster than coming home from a long day at work, ready to relax, then walk inside the house and realize someone broke in, invaded their privacy, and stole their favorite things. The only thing that can make someone feel better in that situation is catching the criminal so they can feel safe in their home again, and of course getting their stuff back. As a tax professional, you can’t go all CSI and try to catch the robbers, but you can help your clients who have been victims of casualty and theft.

A casualty is a damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual.

Deductible casualty losses can result from a number of different causes, including the following:

  • Car accidents (exceptions apply)
  • Earthquakes
  • Fires (exceptions apply)
  • Floods
  • Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses in Publication 547.
  • Mine cave-ins
  • Shipwrecks
  • Sonic booms
  • Storms, including hurricanes and tornadoes
  • Terrorist attacks
  • Vandalism
  • Volcanic eruptions

Theft is the taking and removing of money or property with the intent to deprive the owner of it. The taking of property must be illegal under the laws of the state where it occurred and it must have been done with criminal intent. A conviction of theft is not needed.

Theft includes the taking of money or property by the following means:

  • Blackmail
  • Burglary
  • Embezzlement
  • Extortion
  • Kidnapping or ransom
  • Larceny
  • Robbery

If the IRS pays refunds out to crooks, is that considered theft? Sorry, I couldn’t resist!

For more information on any of these tips, please see Publication 17, Chapter 25 Nonbusiness Casualty and Theft Losses.

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