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Category: Tax
Satisfied Customers: 12460
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I'm amending my 2012 Form 1040 to claim a "CASUALTY LOSS" DEDUCTION

Customer Question

I'm amending my 2012 Form 1040 to claim a "CASUALTY LOSS" DEDUCTION I'd errantly omitted from deducting when it was originally filed -- and I'm reasonably certain it's appropriately a REDUCTION from "GROSS INCOME", rather than as an "ITEMIZED DEDUCTION" -- now seeking confirmation of this belief !!
in early 1980 we'd traded in a personally-used Cabin Cruiser while acquiring a Watercraft more suitable for BUSINESS USE -- as a Charter Fishing- SCUBA Dive Boat, operated by mysef as a USCG-Licensed "Captain", and also regularly operated in my absence (while "ON DUTY" as a Firefighter) by another Firefighter who was alsY USCG- Licensed as a "Captain". From 1980 through 1990, it was used EXCLUSIVELY for Charter purposes
While the boat was titled in my name personally, I "leased" it out to my SUB-CHAPTER
"S" Corporation that conductd its Business Use -- and PERSONALLY CLAIMED as a "SCHEDULE "C" "Business Expense"for its "DEPRECIATION", as an "Offset" to the "Pass-Through" of Sunchapter "S" earnings reported annually in my Forms 1040.
The Charter Business was in active from 1990 through 2010, when it was re-located to FLORIDA with intent to resume "Business Use" on the GULF OF MEXICO. But early in 2012, the boat sunk and had to be scrapped because of "Saltwater" corrosion to steel usd in its Hull, when it was designed/built as a "Freshwater" vessel (on Lake Michigan); rater than using "Brass" components.
Am I correct in believing the (uninsured) "CASUALTY LOSS" claim is deductible (on Line 13 or 14 of FORM 1040, rather than as an "ITEMIZED DEDUCTION" in SCHEDULE "A" ???
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.
Hi,...Casualty losses are treated differently depending on whether the loss occurred to property used in your trade or business, to generate investment income, or for personal or family purposes....Regardless of the type of property, however, the loss is reported on IRS Form 4684, Casualties and Thefts....By the way, one thing to watch out for is the loss being deemed "progressive deterioration," caused by age, wind and weather, wood rot, termites or other insect infestation, or drought. IRS loves to disallow there ... so it' important to document that this was (in line with the definition of casualty) "sudden and unexpected."...And, you're right, if you had a loss to trade or business property or rental or royalty property, complete Section B of Form 4684 and then transfer the gain or loss to Form 4797, Sales of Business Property....That, then, flows to line 14 on the 1040
Expert:  Lane replied 1 year ago.
I hope this has helped....Please let me know if you have any questions at all....If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the faces or stars on your screen, and then clicking “submit...I know it take an extra step, but JustAnswer won’t credit us for the work until you rate....Thank you!Lane……I hold a law degree (JD, Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, Social Security/Medicare, estate, corporate, both for-profit and non-profit, and tax advice, since 1986.
Expert:  Lane replied 1 year ago.
Did you see my answer?