This feature article was published in The Appraisal Journal.
Abstract:
Natural disasters frequently cause damages that qualify for casualty loss deductions on taxpayers’ federal income tax returns. To successfully document and defend casualty loss deductions, taxpayers need to employ appraisers to estimate the decline in the fair market value to the damaged property. Appraisers must be familiar with relevant details of the federal tax rules in order to properly substantiate losses on behalf of their clients. Understanding the types of losses that qualify as casualty losses and the mechanics of the casualty loss deduction is important. This article explains relevant Internal Revenue Service statutes, regulations and rulings, and court cases to clarify important considerations when completing this type of appraisal assignment.