1999 Tax Help Archives  

Pub. 17, Chapter 27 - Nonbusiness Casualty & Theft Losses

Casualty

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

  • A sudden event is one that is swift, not gradual or progressive.
  • An unexpected event is one that is ordinarily unanticipated and unintended.
  • An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged.

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

  • Car accidents (but see Nondeductible losses, next, for exceptions).
  • Earthquakes.
  • Fires (but see Nondeductible losses, next, for exceptions).
  • 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.
  • Hurricanes.
  • Mine cave-ins.
  • Shipwrecks.
  • Sonic booms.
  • Storms.
  • Tornadoes.
  • Vandalism.
  • Volcanic eruptions.

Nondeductible losses.
A casualty loss is not deductible if the damage or destruction is caused by the following.

  • Accidentally breaking articles such as glassware or china under normal conditions.
  • A family pet.
  • A fire if you willfully set it, or pay someone else to set it.
  • A car accident if your willful negligence or willful act caused it. The same is true if the willful act or willful negligence of someone acting for you caused the accident.
  • Progressive deterioration (explained next).

Progressive deterioration.
Loss of property due to progressive deterioration is not deductible as a casualty loss. This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. The following are examples of damage due to progressive deterioration.

  • The steady weakening of a building due to normal wind and weather conditions.
  • The deterioration and damage to a water heater that bursts. But the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty.
  • Most losses of property caused by droughts. To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit.
  • Termite or moth damage.
  • The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. But a sudden destruction due to an unexpected or unusual infestation by beetles or other insects may result in a casualty loss.

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