Hurricane Sandy Influences Tax Problems

Olivia Hurricane Sandy Influences Tax ProblemsHurricane Sandy hit Mid-Atlantic and Northeastern United States as well as, to a lesser extent, Southeastern and Midwestern parts of the country in October of 2012. It blew roofs off buildings, destroyed whole neighborhoods, making considerable damage to local business owners, who would have probably proceeded to solving their tax issues mainly through Section 165 of the Internal Revenue Code (which makes it possible to get a tax deduction for damage suffered during the previous year which was not covered by insurance) if it had not been for the temporary regulations which were issued by the IRS in December of 2011 and which made things significantly more complicated.

These so called “repair regulations” deal with the costs of the property which is tangible and contain a problematic provision on casualty loss, which limits repair deductions for damaged property if this property was used in order to get a casualty loss deduction. This means that many business owners will feel wronged and betrayed – after all, Section 165 was written in order to help taxpayers who sustained damage on their uninsured tangible property. 2011 Regulations put them in an undesirable position in which they are forced to choose and balance between casualty loss and repair deductions.

However, casualty loss rules do not always have to be beneficial for the taxpayer – as a matter of fact, sometimes they can offer the taxpayer almost nothing. If, for example, the damage caused is substantial, and the property in question is in service for a long time, the deduction based on casualty loss will be calculated based on the adjusted basis amount of the property, which due to the circumstances might not be realistic and correspond to the real market value of the property. If, on the other side, the property is relatively new when the damage occurs, the deduction for casualty loss can be appropriate.

RollerCoaster Hurricane Sandy Influences Tax Problems

Submerged Jersey Roller Coaster

This means that the difference between casualty loss deductions can be either beneficial or not depending on the time the property was in service. This is just one of the things to bear in mind when considering whether to go with repair or casualty loss deductions. Because the IRS still has not issued guidance regarding the changes of the regulations which were valid before December of 2011, businesses whose property was damaged by Hurricane Sandy found themselves in a very flexible position.

The tax issues had been there for some time before Sandy made them obvious. Without so many people affected by the destructive power of the storm, it would take some time before these problems would become obvious. But now it is a good time for people who suffered casualty loss to use the opportunity created by the IRS’s untimely response and plan their action carefully in order to maximize the benefits they can get. Paying attention to details and not making any rash decisions can bring those people enough in tax deduction to make them seamlessly get back on track after Sandy and continue with their business.

Olivia Still is a blogger and human rights activist. She is proactive in her endeavors and has cooperated with a number of law firms, New Jersey Employment Law firm being one of them.

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One Response to "Hurricane Sandy Influences Tax Problems"

  1. Sarah Grate says:

    This is the sad reality when it comes to damages and tax deductions. The actual market value of the property at the time it was damaged is the one taken as the basis for computing the deduction. This could really be confusing and must be handled by people who really know what they’re doing. Proper tax evaluation should be given especially to the victims of the hurricane.

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