No Casualty Loss Deduction Because Reimbursement Still Possible.

In 2012, the petitioners' personal property contained in their rental home was destroyed by fire.  The loss was covered by insurance and the petitioners received $60,000 in insurance proceeds, the limits of the policy, and claimed a casualty loss in 2012 for the remaining amount of the loss not compensated for by insurance.  The petitioners sued the landlord for the excess loss not compensated by insurance.  The matter was set for trial in 2014 and in early 2015 mediation was scheduled.  The IRS denied the 2012 deduction and the court agreed with the IRS, noting that a casualty loss is only deductible in the year of occurrence if there is no reasonable prospect of recovery.  Because the petitioners' claim for reimbursement was alive after 2012, no casualty loss deduction could be claimed in 2012.  Hyler v. Comr., T.C. Sum. Op. 2015-34.

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