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Tax question about Casualty & Theft Loss, probably
Posted on 10/11/12 at 1:19 pm
Posted on 10/11/12 at 1:19 pm
This past year, I was included in a class action suit, based on where I live. A chemical plant had a chemical spill long before I bought my property, which did affect my property (26 years ago). I got a bag of peanuts and a post card from the lawyer group from their new Tuscan villas for the event, but I'm wondering if I should claim this on my taxes. It's an event I'm sure I'd now have to disclose if I ever sell, and since it affects the resale value of my property, it seems like there should be some way to deduct it. What do you guys say?
2
Posted on 10/11/12 at 2:44 pm to bojabu
tricky one.....
Technically a casualty loss is defined as the decrease in the fair market value of the property immediately after the causualty or theft. The problem is the casualty occurred 26 years ago when you didn't own the property, so you would be hard pressed to demonstrate a decrease in value immediately after the casualty. I don't think you can just decide to use the date of discovery of the contamination as the date of the casualty. You also have to be able to document how you calculated your loss. Ideally with appraisals before and after the casualty. Another problem.
How much do you figure your loss to be?
There may be tax cases on this. There are many EPA Superfund sites where the owners of the land have had similar experiences. Maybe your tax guy can find a similar tax case that benefits you and go ahead and claim your loss. IDK, lets see what some other posters think. They have some bright minds on this board.
Technically a casualty loss is defined as the decrease in the fair market value of the property immediately after the causualty or theft. The problem is the casualty occurred 26 years ago when you didn't own the property, so you would be hard pressed to demonstrate a decrease in value immediately after the casualty. I don't think you can just decide to use the date of discovery of the contamination as the date of the casualty. You also have to be able to document how you calculated your loss. Ideally with appraisals before and after the casualty. Another problem.
How much do you figure your loss to be?
There may be tax cases on this. There are many EPA Superfund sites where the owners of the land have had similar experiences. Maybe your tax guy can find a similar tax case that benefits you and go ahead and claim your loss. IDK, lets see what some other posters think. They have some bright minds on this board.
Posted on 10/11/12 at 3:00 pm to bojabu
I dont see how this would qualify for a casualty loss.
The chemical spill was a known event before you purchased you property, therfore one could argue the negative effect on property value would have been built in on the purchase date.
The chemical spill was a known event before you purchased you property, therfore one could argue the negative effect on property value would have been built in on the purchase date.
Posted on 10/11/12 at 4:21 pm to SippyCup
So I'll likely need to know more information about if the spill was made public at the time it happened, or 26 years later when the company was sued over it, right?
Posted on 10/11/12 at 5:23 pm to bojabu
The lawsuit you mentioned should be public record and would contain that info about the spill. But I'm not so sure that would support a deduction for a casualty loss. Have you considered a civil suit against the seller of property? Did they or should the have known about the spill? I'm just thinking maybe you overpaid for the property because the seller didn't disclose properly. Maybe he didn't have to disclose. Again IDK. Maybe an attorney will chime in here.
Even if you could find a way to support a tax deduction for a casualty loss on your tax return, which I don't think you can, it's not going to generate the refund you are envisioning. Casualty losses need to exceed 10% of your income and only the excess is deductible. And then you have to itemize the excess loss on a Sch A. Your loss keeps getting whittled away. What year would you throw the loss into? The statute of limitations may have even expired on for the year of loss. The IRS won't let you choose the current year because it's works best for you. That's why I asked you how much you think the loss is, because at the end of the day, there tax benefit of a casualty loss may not be that big.
I'm not a lawyer so don't take this as legal advice.
Even if you could find a way to support a tax deduction for a casualty loss on your tax return, which I don't think you can, it's not going to generate the refund you are envisioning. Casualty losses need to exceed 10% of your income and only the excess is deductible. And then you have to itemize the excess loss on a Sch A. Your loss keeps getting whittled away. What year would you throw the loss into? The statute of limitations may have even expired on for the year of loss. The IRS won't let you choose the current year because it's works best for you. That's why I asked you how much you think the loss is, because at the end of the day, there tax benefit of a casualty loss may not be that big.
I'm not a lawyer so don't take this as legal advice.
Posted on 10/11/12 at 6:26 pm to tigeryat
quote:I seem to recall a case from business law that focused on the issue of a sellers duty to disclose material information that would affect the price of property. It would appear that this is close to the proverbial textbook case.
Have you considered a civil suit against the seller of property?
Posted on 10/12/12 at 6:24 am to Poodlebrain
I agree with Tigeryat. What kind of an impact on the value of the property do you think this had? It may not even be worth the effort.
I think poodlebrain is on the right track if you hope to recoup any loss you feel you might have.
I think poodlebrain is on the right track if you hope to recoup any loss you feel you might have.
Posted on 10/12/12 at 8:24 am to weaglebeagle
The OP's real mistake was not being in the vicinity of the plant when the spill occurred. Every BR resident knows that when a spill occurs you're supposed to immediately go to the emergency room complaining about difficulty breathing. Then when you get settlement money from the chemical plant it is nontaxable personal injury damages rather than taxable damages to property.
Posted on 10/12/12 at 12:15 pm to Poodlebrain
quote:
Every BR resident knows that when a spill occurs you're supposed to immediately go to the emergency room complaining about difficulty breathing.
Lol, you're right about that! I don't think a suit would be the right course of action. I rented from the owner for a couple of years, and he died suddenly. The property then passed to a church located about 100 miles away, I can't see how they could have reasonably known, and since it's not a cult church, I wouldn't sue them over the couple hundred I'd end up with after the dust settled even if they DID know. I think I have enough info though, I'll just burn the plant to the ground for their transgression. Thanks for the info guys!
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