Casualty Loss

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Casualty loss

A financial loss caused by damage, destruction, or loss of property as a result of an unexpected or unusual event.

Casualty Loss

A loss that occurs as a result of an unforeseen, catastrophic event. Casualty losses can occur, for example, when one drives a car through the garage or when a tornado destroys a business. Financial losses from gradual, environmental degradation would not qualify as casualty losses. One may deduct a casualty loss from one's taxable income, subject to certain conditions. Specifically, the first $100 of a casualty loss is not deductible and one must reduce the amount of the deduction by 10% of one's adjusted gross income. For example, if one suffers a casualty loss of $25,000 and has an adjusted gross income of $100,000, the casualty loss deduction is calculated thusly:

Casualty loss = 25,000 - 100 - (0.10 * 100,000) = $14,900.

Casualty Loss

A casualty is the complete or partial destruction of property resulting from an identifiable event of a sudden, unexpected, or unusual nature. Examples are floods, storms, fires, earthquakes, and auto accidents. Individuals may deduct a casualty loss only if the loss is incurred in a trade or business, in a transaction entered into for profit, or is a personal loss arising from a disaster such as those mentioned above. Individuals deduct personal casualty losses as itemized deductions on Schedule A, subject to a $100 nondeductible amount and a reduction of the loss by 10 percent of the taxpayer's AGI.
References in periodicals archive ?
The objectives of this article are to emphasize the important role an appraiser plays in measuring these casualty losses for tax deduction purposes and to explain how an appraiser can avoid making mistakes that might be costly to clients.
In general, casualty losses are deductable in the year in which the casualty occurs (with available carrybacks and carryforwards).
18) Casualty losses must be swift and precipitous; progressive deterioration through a steadily operating cause does not qualify under [section] 165.
Victims suffering casualty losses should complete Section A (personal use property) of IRS Form 4684, Casualties and Thefts, and carry the deductible loss to Schedule A of Form 1040.
Topics covered include property exchanges, casualty losses, conservation easements, self-employment taxes, alternative minimum tax for individuals, Christmas tree production, and a system for record keeping.
She also discussed timber casualty losses at length and how recent court decisions and Revenue Ruling 99-56 have modified the definition of a "single indentifiable property" for purposes of limiting the casualty loss.
In spite of numerous audits of casualty losses, however, deductions are available.
Taxpayers may be eligible to claim their uninsured casualty losses from El Nino storms on their 1997 income tax return, or wait and claim it on their 1998 return, according to the Internal Revenue Service.
Discussed below are several of the applicable income tax rules and regulations that govern the deductibility of such casualty losses.
Some good candidates include the risk manager, who knows about insurance; the CFO, who supplies the funds for casualty losses that go unprotected by insurance and who must have the cash to pay premiums; operating managers, who have reliable information and perspectives on the operating implications of different objectives; and the CEO, who has the best possible strategic perspective and skills for reconciling the competing interests of risk management, finance and operations.
Taxpayers must declare casualty losses in the year they suffered them unless they are in an area determined by the President to warrant federal disaster assistance.