casualty loss
IRS gives some solace in a sad story
Friday, June 18th, 2010 | tax | No Comments
About five years ago, a police officer and his wife decided to use their retirement money to build their dream home in the Smokies. They bought a pretty lot and a log home kit, and contracted with a local builder to erect it. From the beginning, the construction process went terribly wrong. Errors compounded so much that they stopped work and had the unfinished house inspected. The inspection revealed that if the house was finished, it would be so unsafe that it would not receive a certificate of occupancy. The only solution would be to tear it down and start over, which the couple could not afford to do. It was a total loss.
They came to us for help. We calculated the casualty loss on the structure and reported it on their tax return, which created a net operating loss for the year. We took their story all the way to the appeals level, where the deduction was allowed. Having won that battle, we carried the net operating loss back to the years prior to the casualty loss. Last week, we received word that the carrybacks were allowed on appeal.
Our clients had to go back to work to make the mortgage payments on their shattered dream, but we were able to recover over $38,000 in taxes to help ease the pain of their experience. For all the horror stories you hear about the IRS, sometimes they do right by the taxpayer.