2000 Tax Help Archives  

Chapter 27 - Nonbusiness Casualty & Theft Losses

Casualty

This is archived information that pertains only to the 2000 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

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 of beetles or other insects may result in a casualty loss.


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