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.
18) Casualty losses must be swift and precipitous; progressive deterioration through a steadily operating cause does not qualify under [section] 165.
Casualty losses to non-business property are subject to a $100 nondeductible floor per loss.
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.
The third limitation requires combining all casualty losses (under the above guidelines), and reducing the total by 10% of adjusted gross income (AGI).
In general, casualty losses are claimed as itemized deductions; you must be able to itemize on your federal return to be able to claim this kind of loss.
The ordeals of hurricanes Katrina, Rita and Wilma in 2005 and Gustav and Ike this year taught us in the Gulf Coast a lot about serving clients who have experienced casualty losses.
Congress and the IRS have relaxed the rules for deducting casualty losses for victims of the 2005 Gulf hurricanes (i.