Client bought a meth house, inadvertently

[thomtax]

How did the fact that it was used as a meth lab diminish the value of the house?

Unless the meth operation physically damaged the house, the only other damage might be that it might tend to make the neighborhood less attractive for a while if people were generally aware of its use as a meth lab.

The only problem might be that the meth lab would leave something that would remain as a health hazard to future occupants.

There are chemicals used in the production of meth that can permeate the walls, etc. Many jurisdictions will require major cleanup before allowing occupancy.

LT

[Davc]

No casualty loss. The actual event occurred prior to his purchase of the property. And since it was the result of deliberate action of the part of the prior owner, it wouldn't qualify regardless.

[appelman]

How about considering it a theft?

From Pub. 547:

"The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law."

[taxmom34]

obviously someone in the city knew of this being a meth house. i think it would have been the building inspector , or whoever does the inspection for occupancy, i would think they knew or did they perform this test as a requirement on each inspection?

[joanmcq]

Meth labs are toxic to the point law enforcement goes into these places in hazmat suits. It would dimish the value of the property to next to nothing.

[taxxcpa]

Meth

I had a client who bought a service station that had been used as a meth lab by the former owners. He was aware of it, but was not aware of any hazards involved.

[joanmcq]

Must not read the news. Or use the computer to figure out why that had to be disclosed. Or had a agent that was an idiot.

[Davc]

I had a client who bought a service station that had been used as a meth lab by the former owners. He was aware of it, but was not aware of any hazards involved.

Anyone who buys a service station or any other property that has been used in a way that could cause contamination should either require the proper testing prior to the purchase. Otherwise, if a problem is discovered in the future anyone who has owned the property since the last test is liable for clean up.

[taxxcpa]

My client is off the hook

Anyone who buys a service station or any other property that has been used in a way that could cause contamination should either require the proper testing prior to the purchase. Otherwise, if a problem is discovered in the future anyone who has owned the property since the last test is liable for clean up.

Since my client is now deceased, he is off the hook for the clean-up.

[joanmcq]

His heirs would be though!

[DaveinTexas]

Casualty/Theft Loss

If the seller was supossed to reveal the facts about the house maybe you can claim it is a theft loss.

In the back of my mind, maybe this is what I meant to ask.

If the purchase of the home was $100,000 and there was significant damage undisclosed by the seller (probably at least $30,000) the taxpayer has incurred a loss (my logic). The home was valued at $100,000 but without the State mandated repairs performed the home's value is $70,000 or unsaleable; maybe even a FMV of $0 because no one would purchase this home knowing the facts.

At the very least there was misconduct, misrepresentation and fraud on the part of the seller and my client was defrauded by at least the cost of repairs he will have to make on this property to make it whole.

Do you think this would fly as a theft loss?

Thanks for all the responses by the way. I'm not trying to cheat the IRS, just looking for an equitable ending to all this.

[taxmandan]

I think your client would have to litigate for recovery of his loss thru the courts and only after that process is concluded would it be considered a loss. So long as there is a chance for recovery through the courts he can't count it as a loss, yet. Somebodies' insurance is going to have to eat this, the sellers', his brokers', the inspectors', it'll be alot of finger pointing but with an aggressive lawyer he should eventually get something out of it.

[DaveinTexas]

I think your client would have to litigate for recovery of his loss thru the courts and only after that process is concluded would it be considered a loss. So long as there is a chance for recovery through the courts he can't count it as a loss, yet. Somebodies' insurance is going to have to eat this, the sellers', his brokers', the inspectors', it'll be alot of finger pointing but with an aggressive lawyer he should eventually get something out of it.

This makes sense.

Thanks all for the responses.