Casualty Losses

Question 1

Individuals can deduct losses if fit into 3 categories:

Answer 1

1 business trade: 165 c-1

2. Investment 165 c-2
3. Personal casualty losses 165 c-3

Question 2

the loss cant be

Answer 2

compensated by insurance or otherwise.

Question 3

in casualty losses you need

Answer 3

closed and completed transactions

Question 4

Analysis

Answer 4

1. 1001 to calculate gain or loss
2. Deductible via 165?
3. Look to 62 for ATL

Question 5

appraisal value

Answer 5

irrelevant- use AR unless sale to related party.

Question 6

165 c-2 investment property

Answer 6

allows loss even ATL though most BTL

Question 7

Theory for allowing investment prop losses

Answer 7

Lowers EI

Question 8

If motive isnt profit

Answer 8

cant take the loss. 1.165-9

Question 9

mixed motive (classic car)

Answer 9

virtually any personal use results in dissallowance of deduction.

Question 10

conversion of personal to investment then sell at loss

Answer 10

possible decution. take bases lower of Cost/FMv at time of conversion

Question 11

rationale for no deduction of personal prop losses

Answer 11

imputed income isnt taxed, so we dont allow deductions for expenses related to producing nontaxed income.

Question 12

theory on not taking imputed income

Answer 12

consumption is the return.

Question 13

if you took previous depreciaiton on property before loss

Answer 13

must ajust bases to account for depreciation- no double dipping!

Question 14

for losses need a …

Answer 14

closed and complete which is a realizaiton events

Question 15

theft is a

Answer 15

realization event

Question 16

if insurance does pay : less/more

Answer 16

less- reduce loss by amount

more- report income.

Question 17

IN a loss if reasonably prospect of recovery

Answer 17

loss is suspended until recovery is determined with reasonable certainty.

Question 18

HYPO: BUY house for 200k, goes up to 250k, burns down, 50k (loss or gain

Answer 18

vanishes

Question 19

Hypo- house burned, no insurance

Answer 19

165-4 deduction limited to extend loss exceeds 10% AGI (150K loss, 100k GI, S0 150-10=140 LOSS BTL
Reduce bases by amount you take deduct as loss.

Question 20

criticism of alloing loss for no insurance house burned

Answer 20

partial insurance through tax code. since its no onger a production of imputed income.

Question 21

hypo: sale on stock at a loss

Answer 21

ATL- 165 c -2 applies to property held for profit.