Tuesday, August 8, 2017

APPRAISERS ARE KEY TO DISASTER LOSS DEDUCTIONS



APPRAISERS ARE KEY TO DISASTER LOSS DEDUCTIONS
Often an essential part of the recovery from a catastrophic event is determining the amount of a deductible loss. Where adequate insurance coverage is in place the recovery focuses on collection of proceeds based on the policy provisions. But where insurance is not adequate or not available, the possible benefits of a tax deduction can be an important consideration. A properly prepared appraisal demonstrating the decrease in the value of the property resulting from the catastrophic event becomes essential.
In addition and integral to the appraisal process, it must be noted that the appraiser’s work product may be examined by an IRS agent who is reviewing the overall casualty loss deduction claimed on taxpayers’ income tax return. Most often at that meeting the appraiser will not be in attendance; only the report will be reviewed and the taxpayers’ representative, usually a CPA or EA will be the person defending the casualty loss claim. As such it is important that the tax professional be consulted before the appraisal report is issued final. It is not the tax professional’s responsibility to impact the conclusions of the appraiser, in fact that is the last thing that the tax professional should be a part of. But a knowledgeable tax professional should be able to review the appraisal report to see where the strengths and weaknesses are that will impact an IRS review. Clarity is important and that should be the only concern of the tax professional in any review of an appraisal.
In the end the tax professional and the professional appraiser are working together to assist the taxpayer report a casualty loss claim that is sustainable as a result of an IRS review.
After a physical catastrophic event strikes the recovery process starts immediately. One important task is the valuation of the loss. To complete that job it is often necessary to call on the expertise of a professional appraiser. The significance of the appraiser’s work in these situations brings to mind certain aspects of the appraiser that are very important and aspects of the situation that the appraiser cannot be called on to provide expertise about. For example, after a fire, the appraiser can provide a pre- and post- loss set of valuations; but the appraiser should not be called on to be a forensic analyst to determine what caused the fire.
There are many aspects of the professional appraisal process that are the subjects of the professional training an appraiser takes in addition to the material referred to in this article. This article is geared to the fact that, like other professionals that are called on in these situations, the appraiser may never have been called on to prepare one of these reports.
When the appraiser is called on to prepare a report of the pre- and post- loss valuations the appraiser needs to know what the report is going to be used for. A report for insurance or property tax assessment may be different from one that is going to be used to support an income tax report. There are specific aspects of an income tax casualty loss appraisal of loss that must be understood and adhered to in order for the appraisal to have any value to the taxpayer. Ignoring the special rules may be seen as correct by the appraiser, but the result will be a useless report. In order for the report to be useful to the client, the appraiser needs to know the unique rules that must be addressed. Additionally, it is important for the appraiser to be knowledgeable about how the appraisal report will be challenged by the IRS or will require testimony in a tax court hearing.
This article relies on income tax cases that taxpayers either have been successful 0or unsuccessful in securing a tax deduction for a casualty loss deductions. Most reports that meet the IRS requirements should be accepted without any questions, some will need to be vetted in an IRS examination and only a few will see the daylight of a tax case dissection. Since the results of the unquestioned tax returns and resolved tax examinations are not available to us, we have to rely on published court opinions and IRS rulings to understand the process used to resolve disputed tax loss deduction claims.
The IRS does have very specific rules for what qualifies as an appraisal for tax purposes, however, those rules are not set out in the casualty loss sections of the Internal Revenue Code, and the rules are part of the Code and Regulation for computing a charitable contribution of an object other than cash. These rules are not covered in this article. The user is referred to IRS Publication 561, “Determining the Value of Donated Property.” On the cover of Pub 561, the IRS notes: “This publication does not discuss how to figure the amount of your deduction for charitable contributions or written records and substantiation required. See Publication 526, Charitable Contributions, for this information.” Unfortunately, the publication does not provide the specialized assistance needed for a casualty loss valuation.

John Trapani has available a book (APPRAISER’S GUIDE TO INCOME TAX REQUIREMENTS IN A CATASTROPHIC LOSS APPRAISAL VALUATION) that discusses the unique issues of casualty loss appraisals in detail. The following is a list of topics contained in that book.
The material is covered in the following topics.

Table of Topics

Page
Topic 1
Role of Appraiser, Competence of Appraiser

6
Topic 2
Specific Notation in the Report by the Appraiser

7
Topic 3
Definition of a Qualifying Casualty Loss Event

9
Topic 4
Report Will Have Two Valuations. What is Being Valued?

12
Topic 5
Physical Damage / Identifiable Event

17
Topic 6
"Sudden, Unexpected, and Unusual"

24
Topic 7
Debris Observed or Photographic Evidence, Order to Demolish

28
Topic 8, 9 & 10
The following three topics are related in many ways, Obsolescence may be confused with “Market Stigma” or Buyer Resistance”. For tax purposes, they have individual issues and will be considered separately.They are split into these topics, but should be read and understood as a single topic.
Topic 8
Obsolescence and Progressive Deterioration

30
Topic 9
Short-term vs. Long-term Value Fluctuations (Buyer Resistance)

31
Topic 10
Calculating the Amount of the Casualty Loss, Post-event “Hypothetical” Costs

42
Topic 11
Highest and Best Use of Property

50
Topic 12
Recent Sales in the Area

53
Topic 13
Real Estate Held for Personal Use

54
Topic 14 
Non-Personal Use Real Estate

56
Topic 15 
Landscaping, Trees, Shrubs

59
Topic 16
“Cost of Repairs” IRS Successes in Eliminating Credibility of Taxpayer’s Appraisal

61
Topic 17 
Disasters

70
Topic 18 
Words Have Meanings”

71
CONCLUSION

79
EXAMPLES

80
The individual topics cover cases along with IRS rulings that support the conclusions and recommendations presented in the summary.
There are traditional necessities of a professional appraisal that are not covered in this article.
When it is necessary for taxpayers to “invest” in an appraisal to determine and support a casualty loss deduction, taxpayers and tax professionals need to have an understanding of what the appraisal report should include. In a real estate appraisal, the dollar amounts will likely be significant and the demands of the Internal Revenue Service (IRS) are not necessarily known by many appraisers. As a result the appraisers may issue a “normal appraisal” as they would for a refinancing or sale. It turns out that all that content is necessary, but there are specific requirements that may not be addressed but are required in order for the IRS to consider the appraisal valid. The requirements set out in this article are the result of reviewing and analyzing IRS publications and court cases. In court cases judges add additional points that they found the taxpayer’s documentation either included that swayed their conclusion or did not include that had a negative effect on the courts’ decision process. In some cases the court brings in a requirement that simply adds to the court’s weighing of conflicting appraisals.
Appraisals for disaster and “common” casualty losses are different from the normal real estate appraisal. The qualifications of the appraiser do not change, but the report has some unique features. There are specific qualifications of the appraiser that courts use to weigh the reports prepared for the taxpayer and those prepared for the IRS.
If the deduction becomes contested in an examination, the IRS may bring in their own “expert.” There may be a major difference between the appraisal prepared by the taxpayer’s professional and the one prepared by the IRS professional. The IRS professional may suffer from not being a local appraiser; that is often held against the government’s efforts as the non-local appraiser may miss unique local conditions. The taxpayer’s appraiser should emphasize his/her specific knowledge of the local area.
In the case where the IRS adds their expert into the mix, the relative weight of the work products will often hinge on a few details that may be remotely related to the actual appraisal. The taxpayer who has secured a quality appraisal soon after the damage occurs seems to have an edge over the expert that the IRS hires; the IRS expert will prepare a report two or more years after the event, the physical aspects of the site will be different. On the other hand, the market values of the property will have that time to mature and may be in conflict with the assumptions in the taxpayer’s commissioned appraisal.
Summary:
Here is a list of critical points that are discussed in detail in the book.
The development of casualty loss deduction rules related to appraisals and appraisers have settled on some prerequisites including
a)    Hypothetical” appears a number of times in the literature and when it appears it is usually a problem for the taxpayer. The IRS sees “hypothetical” as an “imaginary thought exercise” and not real. In effect the presence of the word in the report diminishes the usefulness of the report. No one believes that the appraiser has actually examined the property immediately before or immediately after the flood, earthquake, mudslide, fire, storm or “other casualty” event when the debris is still ruining the “curb appeal.” Interestingly, the IRS recognizes the physical and psychological impact of debris,

b)    “Buyer Resistance” is baked into the regulations as an adjustment that must be made to eliminate its impact on the diminished post-event value.

c)   The presence of physical damage,

d)   The damages result from "sudden, unexpected, and unusual" actions,

e)   The appraiser must consider, as a separate amount, the possible impact of Buyer Resistance,

f)    That the taxpayer was powerless to prevent the loss and within reason exerted appropriate effort to minimize the damage.

JOHN TRAPANI, CPA assists both taxpayers directly and
advises taxpayers’ tax professionals.

This material was contributed by John Trapani. A Certified Public Accountant who has assisted taxpayers since 1976, in analyzing and reporting transactions of the type covered in this material.  
© 2017, John Trapani, CPA,
All rights to reproduce or quoting any part of the entry in any other publication is reserved by the author. Republication rights limited by the author regarding this material.


JOHN TRAPANI


Certified Public Accountant


2975 E. Hillcrest Drive, #403


Thousand Oaks, CA 91362


(805) 497-4411




                                                                                                             
It All Adds Up For You




DISCLAIMER
The contents of this blog entry represent only the understanding of the author.
Any accounting, business or tax advice contained in this entry is of a general nature and does not have any legal weight, it is not aa authoritative analysis of a specific issue, nor a substitute for a formal analysis of a specific fact situation. It cannot be considered sufficient to avoid tax-related penalties that might be assessed by a tax authority.
If desired, John Trapani, CPA  would be pleased to perform a complete research and analysis of a taxpayer’s situation.
This material was completed on the date of the posting

###


Wednesday, March 29, 2017

HOW DO YOU ELECT TO CLAIM LOSS IN YEAR PRECEDING “DISASTER YEAR”



HOW DO YOU ELECT TO CLAIM LOSS IN YEAR PRECEDING “DISASTER YEAR”


After a Disaster taxpayers may elect to claim a casualty loss on the tax return for the “prior year”. The rules have changed!
 

GENERAL RULES
Internal Revenue Code §165(a) states:
There shall be allowed as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise.



This blog post is a two part discussion of the rules for claiming a disaster loss on a tax return for the tax year prior to the loss year. This discussion involves several words and phrases that have exact meanings within the context of this material. Please be careful to understand each of these words and phrases within the context of a disaster loss. Do not interchange any of the words and phrases that seem similar.

First is a discussion of the rules under §1.165-11 that has been replace by a temporary regulation. Second, temporary regulation §1.165-11T, issued in October 2016, is discussed under the heading:  TEMPORARY REGULATION §1.165-11T, and REV. PROC. 2016-53”

To understand the temporary regulation §1.165-11T the original regulation is discussed first to demonstrate the significance of the changes. The new regulation is slated to expire October 13, 2019. While it would be very useful for taxpayers if the temporary regulation is made permanent, a three year window for it creates a narrow window where it can be used as explained in an example.

As delineated in §165(a), taxpayers who experience a disaster, claim the loss in the year it is “sustained.” The Internal Revenue Code permits claiming the loss on the tax return for the year preceding the actual loss year under §165(i). When claiming it in the preceding year, all the rules, including carryback rules, apply as if the loss claim year is the loss event year. This election, previously under §1.165-11, must be made on or before the later of:
(1)      the due date for filing the income tax return (determined without regard to any extension of time) for the taxable year in which the disaster actually occurred, or
(2)      the due date for filing the income tax return (determined with regard to any extension) for the taxable year immediately preceding the taxable year in which the disaster actually occurred.
(Generally, the first rule will be the operative date limitation.)

NO EXTENSION OF TIME TO MAKE THIS DECISION – 90 DAY LIMITATION TO REVOKE ELECTION INVALIDATED BY COURT
The Regulation, §1.165-11, is specific regarding when the election must be made to take the deduction on the return for the year preceding the year of the actual loss. However, sometimes the circumstances make it difficult to comply with the rule in time to file the return, generally by April 15 of the year following the year of the event.

Under very limited and restrictive conditions, it has been possible to request an extension of time to make the election to take the loss in a prior year. (PLR’s 9752056, 9732012, 9622020, 9603023, 9603024, 9534016, 9218022, 9120002, and 9145009) The fact patterns in most of the PLR’s are similar. The taxpayer’s accountant made a mistake and the taxpayer wished to be given the opportunity to make the late election. In PLR 9145009, the IRS granted an extension of time to take the loss in the year preceding the year of the event when the accountant failed to notify the taxpayers of the election requirements and the disaster (freezing of crops) occurred at the end of the year, not providing sufficient time to determine the amount of the damage to the property by the due date of the return. Based on these facts, the Service granted an extension of time to elect to take the disaster loss in a preceding year. While there are a number of private letter rulings on this topic where the taxpayer was given the opportunity to make the late election to take the loss on the return for the year preceding the loss, they are concentrated in a seven year time period; they do not appear to be present before or afterward.

For the 2005 Hurricane Katrina and the 2013 Colorado Floods, the IRS issued blanket extensions to October 15th of the year following the years of the events (October 15, 2006 and 2014, respectively) to file for the losses on the tax returns for the respective preceding years of these events.

Regulation 1.165-11, Election in respect of losses attributable to a disaster, in part states, “(e) Time and manner of making election.”
ü  Election to claim a deduction for a disaster loss … must be made by filing
(1)    a return,  (2) an amended return, or  (3) a claim for refund
ü  Clearly showing the election provided by §165(h) has been made.
ü  Specify the date or dates of the disaster,
ü  The city, town, county, and State in which the property which was damaged or destroyed was located at the time of the disaster.
ü  An election must be made on or before the later of
(1)         the due date for filing the income tax return (determined without regard to any extension of time granted the taxpayer for filing such return) for the taxable year  in which the disaster actually occurred, or
(2)         the due date for filing the income tax return (determined with regard to any extension of time granted the taxpayer for filing such return) for the taxable year immediately preceding the taxable year in which the disaster actually occurred.
ü  Such election shall be irrevocable after the later of … 90 days after the date on which the election was made
ü  No revocation of such election shall be effective unless the amount of any credit or refund which resulted from such election is paid to the Internal Revenue Service within the revocation period.
ü  In the case of a revocation made before receipt by the taxpayer of a refund claimed pursuant to such election, the revocation shall be effective if the refund is repaid within 30 calendar days after such receipt.

Revocking the Election:
The IRS, in Publication 547 (2013 Edition), asserts that taxpayers have 90 days after making the election to revoke it. Regulation §1.165-11(e) states that the taxpayer has 90 days in which to revoke the election. The Tax Court in MATHESON (74 TC 836, July 24, 1980 (Acq.)) ruled the regulation invalid. The Court held that the intent of the legislation was to give taxpayers immediate help, but a comparison of the relative tax benefits might not be possible until the time for filing their returns for the year of the loss. If a §165(i) election is made, it applies to the entire loss sustained by the taxpayer (§1.165-11(d)).

The facts of the MATHESON case are summarized below:
Petitioners suffered a disaster loss in September, 1976. On October 28, 1976, they filed an amended Federal income tax return for 1975 electing under §165(h) (predecessor to §165(i)) to treat the disaster loss as if it had occurred in 1975 and, thereby, claiming itemized deductions of $29,558 attributable to that loss.

Ninety-five days later, on January 31, 1977, petitioners filed a second amended Federal income tax return for 1975 attempting to revoke the election made pursuant to section 165(h). The return was accompanied by a check payable to the Internal Revenue Service in the amount of $6,286, representing the refund of $5,986 received from the first amended return plus $300 in estimated interest accrued on the funds received.

Petitioners claimed a disaster loss of $29,558 in their 1976 joint Federal income tax return.

The Tax Court concluded:
Held, that part of §1.165-11(e), Income Tax Regs., which imposes a 90-day time limitation for revoking an election is invalid because a time limitation for revoking an election which is shorter than the time limitation for making an election under §165(h), I.R.C. 1954, as amended, effectively frustrates the purpose of the statute.

While the IRS acquiesced to the decision, the regulation was not withdrawn and the simple language in Pub. 547 was not modified to conform with the court decision.


TEMPORARY REGULATION §1.165-11T
and
REV. PROC. 2016-53

In October 2016 the IRS issued 2Temporary Regulation §1.165-11T and the companion Rev. Proc. 2016-53. These materials change the following:
·       the applicable dates for claiming a disaster loss on a tax return for the preceding year,
·       the “90 day revocation” limitation rule, and
·       most significantly, (without discussion, clarifies) the definition of the year of the “actual loss.”
(The Code section, “165(i)(1) ELECTION TO TAKE DEDUCTION FOR PRECEDING YEAR” refers to:
“[A]ny loss occurring in a disaster area and attributable to a federally declared disaster may, at the election of the taxpayer, be taken into account for the taxable year immediately preceding the taxable year in which the disaster occurred.

The temporary regulation provides for the following:
[A]pplies to elections, revocations, and any other related actions that can be made or taken on or after October 13, 2016 and expiring October 13, 2019.

In the temporary rules discussed below, the Service refers to “sustained” instead of “occurred”. These temporary rules are in effect for a specified period of, October 13, 2016 to October 13, 2019. Because of the limited three year period for this temporary regulation there may be confusion determining how to apply this regulation once the expiration date is close at hand. The importance of the use of the word “sustained” is part of the discussion below.

The important word appearing in §165(i) is “occurred,” which generally refers to the actual loss experience, corresponding to the federal disaster declaration incident period. In the temporary regulation sustained” is used to effectively replace “occurred.”

§1.165-11T(a) In general. Section 165(i) allows a taxpayer who has sustained a loss attributable to a federally declared disaster in a taxable year to elect to deduct that disaster loss in the preceding year.

The actual law is always a good place to start to understand the IRS regulations.
Internal Revenue Code §165(i) DISASTER LOSSES states:
165(i)(1) ELECTION TO TAKE DEDUCTION FOR PRECEDING YEAR.— Notwithstanding the provisions of subsection (a), any loss occurring in a disaster area and attributable to a federally declared disaster may, at the election of the taxpayer, be taken into account for the taxable year immediately preceding the taxable year in which the disaster occurred.
165(i)(2) YEAR OF LOSS.— If an election is made under this subsection, the casualty resulting in the loss shall be treated for purposes of this title as having occurred in the taxable year for which the deduction is claimed.

The temporary regulation takes a position that in §1.165-11T(b) (4) defining the term “disaster Year” for the first time. It is the year the deduction is properly claimed. This is consistent with the last sentence of the Code section quoted above. Until now “disaster Yearwas not specifically defined.

§1.165-11T(b) (4) the disaster year is the taxable year in which a taxpayer sustains a loss attributable to a federally declared disaster.

The “disaster year” is no longer defined as the year the event "happens." The “disaster year” is the year the claims are “settled.” In order for a claim to be “sustained” as required by  §1.165-11T(b) (4), it must have both “occurred” and is “settled.”

§1.165-11T(c) Scope and effect of election. An election made pursuant to section 165(i) for a disaster loss attributable to a particular disaster applies to the entire loss sustained by the taxpayer from that disaster during the disaster year. If the taxpayer makes a section 165(i) election with respect to a particular disaster occurring during the disaster year, the disaster to which the election relates is deemed to have occurred, and the disaster loss to which the election applies is deemed to have been sustained, in the preceding year.

Once the loss is “sustained,” that defines the “disaster year” and thus since one part of “sustaining” is “occurred,” using the word “occurring” above is not inconsistent. It appears that “sustained” is the operative word not “occurred.” Generally, “sustained” is a combination of both “occurred” and “settled.” Without “settlement,” the loss is not “sustained.”

It does not appear to be a casual use of the word “sustain” in the temporary regulation instead of “occur,” the word that was used in the regulation being replaced and §165(i). Understandably, Congress may not have been precise while the IRS has the time to get into the details and understand the impact of these words. The IRS is using a new term, “disaster year”, to bring in “sustain” as the critical event. This is a welcomed clarification.

What is the importance of the substitution? “Occurs” is simple; it is when the event “happened,” the fire, flood, or earthquake. To be “sustained,” claims for compensation must be “settled.” It must be a “closed transaction,” no longer is there any “reasonable prospect of recovery” for any additional compensation. All claims to be “closed” must be finalized with those who are responsible for payment, including, if necessary, final adjudication, or actual abandonment of any remaining claim, or closure of an applicable statute of limitation for pursuing a claim. It might take years for the taxpayer to finalize or “settle” all the claims for compensation.

The problem with the old regulation was its emphasis on occurred; that designated a point in time that might not correspond with the period in which the loss was sustained. As a result, if the loss was not a closed transaction by the short due date for filing the loss on the tax return for the prior year the taxpayer would be precluded from any choice once the loss is settled in a subsequent year.

The “actual experience of the disaster event” is no longer tied to the year when it happens. The “disaster year” is now the year that the loss is “sustained,” not the year the disaster event actually created the damage. When the disaster loss is “sustained” is the year that is the basis for determining how to compute the “preceding year.” Once the year the disaster loss is “sustained” is determined, establishing the “disaster year,” the “year preceding” that year is the year to elect under §165(i) as the loss year. It is no longer necessarily a fixed date for all taxpayers experiencing the same disaster event.

Most taxpayers rely on IRS Pub. 547 when preparing a disaster income tax return. Taxpayers do not read the law or the regulations. Pub. 547, understandably, is written in language that might be less technical than the law and regulations. The Pub. refers to “happened” and does not discuss “sustain” or “settled.” “Occurred” does appear in the Pub., that seems to be a drafting alternative to continuing to use “happened.”

Example:
·       The disaster event “happens” in 2016, the year the damage is done.
·       It is “settled,” “closed” in November 2018.
Under the temporary regulation the year 2018 is the “disaster year,” the year the loss is “sustained,” the year it was “settled.” The “disaster year” is the year it is allowed as a casualty loss deduction without regard to §165(i).

By electing the §1.165-11T benefits, the loss deduction is allowed to be claimed in the 2017 tax return. Under the old rule the critical word was “occurred” and the “preceding year” would have been 2015. Because the loss was not fully determined (closed) and “settled” until 2018, under the old regulation, the taxpayer would have lost the flexibility of choosing a year to deduct the loss.

Finally, two additional changes need to be attended to. First, how long does the taxpayer have to make the election? Second is a change in how to revoke that election. In the above example, the disaster year is 2018, the taxable year in which a taxpayer sustains the loss. By definition in the regulation, “the preceding year is the taxable year immediately prior to the disaster year.”

§1.165-11T(f) Due date for making election.— The due date for making the section 165(i) election is six months after the due date for filing the taxpayer's federal income tax return for the disaster year (determined without regard to any extension of time to file). The taxpayer could have filed the tax return for the disaster year timely by April 15, 2018 and yet would have until October 15, 2018 to elect to take the loss on the 2016 tax return.

Making the election requires disclosures that are delineated in accompanying Rev. Proc. 2016-53:
.02 The election statement must contain the following information:
(1)       The name or a description of the disaster and date or dates of the disaster which gave rise to the loss.
(2)       The address, including the city, town, county, parish, State, and zip code, where the damaged or destroyed property was located at the time of the disaster.
.03 For an election made on an original federal tax return, a taxpayer must provide the information required by section 3.02 of this revenue procedure on Lines 1 or 19 (as applicable) of Form 4684 (Casualties and Thefts). A taxpayer filing an original federal tax return electronically may attach a statement as a PDF document if there is insufficient space on Lines 1 or 19 of the Form 4684 to provide the information required by section 3.02. For an election made on an amended federal tax return, a taxpayer may provide the information required by section 3.02 by any reasonable means. Reasonable means include, but are not limited to, writing the name or a description of the disaster, the State in which the damaged or destroyed property was located at the time of the disaster, and Section 165(i) Election” on the top of the Form 4684 and providing the rest of the information required by section 3.02 in either the Explanation of Changes in the applicable amended Form.

The last date for filing an election is October 13, 2019, (the expiration of the temporary regulation §1.165-11T) and it appears that the period for revoking the election under the new rule also expires on October 13, 2019.  This is different for an election that would have had an October 15, 2018 filing date limitation. For the October 15, 2018 election, the taxpayer has an additional 90 days to revoke the election.

The October 13, 2019 date presents restrictions that the latest disaster year would be 2018 where the new regulation could be used and possibly the latest year of a disaster actually happening might be 2017 if the taxpayer needs to make a distinction between “occurred” and “sustained.”

Under §1.165-11T, the revocation rule is defined clearly and more liberally in terms of the decision period that is allowed compared to the prior rule.
(g) “… a section 165(i) election may be revoked on or before the date that is ninety (90) days after the due date for making the election.

These new rules mean that the taxpayer is no longer under pressure to make an election that involves one of the most important decisions that the taxpayer will have to make during their recovery process. It also allows taxpayers who might have been restricted from using the amended return option because the loss is not “sustained” in the year it occurs to now use the benefit in the year prior to the year it is “sustained.”

We can only hope that the temporary regulation is made permanent. Unfortunately the IRS may not have enough time to gather statistics on tits actual use to make a final determination prior to its expiration.

The definition of “Occur,” “settled,” and “Sustained” are based on §1.165-1 (d) Year of deduction (2). That subparagraph also mentions “reasonable prospect of recovery.”


JOHN TRAPANI, CPA assists both taxpayers directly and
advises taxpayers’ tax professionals.

This material was contributed by John Trapani. A Certified Public Accountant who has assisted taxpayers since 1976, in analyzing and reporting transactions of the type covered in this material.  
© 2017, John Trapani, CPA,
All rights to reproduce or quoting any part of the entry in any other publication is reserved by the author. Republication rights limited by the author regarding this material.


JOHN TRAPANI


Certified Public Accountant


2975 E. Hillcrest Drive, #403


Thousand Oaks, CA 91362


(805) 497-4411




                                                                                                             
It All Adds Up For You




DISCLAIMER
The contents of this blog entry represent only the understanding of the author.
Any accounting, business or tax advice contained in this entry is of a general nature and does not have any legal weight, it is not aa authoritative analysis of a specific issue, nor a substitute for a formal analysis of a specific fact situation. It cannot be considered sufficient to avoid tax-related penalties that might be assessed by a tax authority.
If desired, John Trapani, CPA  would be pleased to perform a complete research and analysis of a taxpayer’s situation.
This material was completed on the date of the posting

###