Monday, November 21, 2011

Was it a Casualty Loss or an Involuntary Conversion Gain

Was it a Casualty Loss or an Involuntary Conversion Gain

The income tax consequences of a casualty event seem to be simple on their face. After all, most of these events are covered in the Internal Revenue Code in two sections and for personal losses, only portions of those Code sections.


My experience over the past decade convinces me that they are not that simple. Why, I have corrected the reporting a number of returns in the past decade. Sometimes the need to correct a return involves the taxpayer paying additional taxes. Most of the time taxpayers actually get refunds. In the cases where taxpayers have to pay additional taxes due to the correction of a previously filed return it always looks like the tax preparer did not understand the situation, the tax preparer did not take the necessary time prepare a correct return. Or the tax preparer wanted to secure a refund for the taxpayer, even though there was a high likelihood that that refund would have to be repaid in a future year. A lot of information is provided on this blog, but a competent tax preparation professional will save a taxpayer more than the fee that is paid for the services. That may sound self-serving, as I am a tax preparer. It is self-serving, and it is also true.


As an example see “Don’t Rush to Deduct” elsewhere in this blog.

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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.  
Internal Revenue Service Circular 230 Disclosure
This is a general discussion of tax law. The application of the law to specific facts may involve aspects that are not identical to the situations presented in this material. Relying on this material does not qualify as tax advice for purpose of mounting a defense of a tax position with the taxing authorities
The analysis of the tax consequences of any event is based on tax laws in effect at the time of the event.
This material was completed on the date of the posting
© 2012, John Trapani, CPA,