Deductable Damages?

[Sparky]

What would you do . . I have searched the forum and the Taxbook along with IRS Casualty & Theft Pub. . . in a nutshell; taxpayer was commuting home from his self employment business (driving a truck used 77% for business) when suddenly blinded by sun; swerved out of the way of hitting a parked car; lost control of the vehicle. Vehicle ended up hitting a different parked car in strangers driveway and moved along to hit the corner of same strangers house. Taxpayer had no insurance on this vehicle so losses include his truck; strangers car and house. He has paid about $20,000 in damages and is out a truck. This would not be business because he was commuting home. Accident took place in Sept. '12; damages were paid in 2013. Taxpayer would receive about a $2100 tax break if I did a Sch A personal use 4684 and took the deduction in 2012.

Thanks for your time.

[Bees Knees]

I have several observations:

1) According to TTB page 4-20, If you want to claim a casualty loss, the deduction is the lesser of the taxpayer's cost or basis in the property, or the reduction in FMV due to the casualty, minus any insurance or reimbursement received, or that could have been received if the taxpayer chooses not to file a claim.

So what is the taxpayer's cost basis in the stranger's car and house? Zero, because the taxpayer does not own the stranger's car and house. The only casualty that can be deducted is the reduction in the FMV of the taxpayer's truck.

2) A car accident is listed as a deductible casualty loss, but IRS Pub 547 says it's not a casualty loss if it was due to the taxpayer's willful negligence or willful act.

So was it the taxpayer's negligence that caused the accident? You might want to see the police report and any civil claims the victim may be alleging in Court.

3) The insurance reimbursement requirement only applies if there is insurance. IRS Pub 547, page 8 gives an example of a car accident where there is no insurance. The full amount of the loss is deductible.

Having said that, many states require insurance on vehicles. If the taxpayer broke state law by not having insurance, the IRS might say the loss is disallowed under the negligence clause.

[taxea]

I believe your client was in violation of state law by not having the truck insured. It seems to me that the loss was the entire amount caused by the accident, not just the loss to the vehicle. Having said that I don't know whether the loss is deductible due to the insurance issue. Are you saying he had no business liability insurance either? If he can claim the loss it is a business loss.

[Bees Knees]

I believe your client was in violation of state law by not having the truck insured.

How do you know? Do all States require insurance on vehicles?

It seems to me that the loss was the entire amount caused by the accident, not just the loss to the vehicle.

What code section allows you to claim a casualty loss on damage to property you do not own?

If he can claim the loss it is a business loss.

How do you claim a business loss on a personal vehicle that gets in an accident during a personal commute?

[taxea]

How do you know? Do all States require insurance on vehicles?

Comment: Do you know of a state that doesn't require auto insurance?

What code section allows you to claim a casualty loss on damage to property you do not own?

he has loss of money due to the damage caused by his vehicle

How do you claim a business loss on a personal vehicle that gets in an accident during a personal commute?

I understood this to be his business vehicle...If I read the original post wrong I apologize.

PS there is no need to get huffy...

[ChEAr$]

After thinking long and hard about it, since the vehicle is not owned by an entity and therefore 100% business expensible (regardless of any imputed personal usage value), the owner was driving it on his own time, i.e. within the 23% personal usage range). Therefore the damages caused by the accident are wholly personal in nature.

If the vehicle had been owned by a corporation say, damages to third parties' property would have been sec 162 expenses, and of course the loss of vehicle also deductible.

Looks like he's up a certain named creek without adequate means of propulsion.