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Hurricane Sandy Influences Tax Problems

OliviaHurricane 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.

Sandy Roller Coaster
Submerged Jersey Roller Coaster

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.

One thought on “Hurricane Sandy Influences Tax Problems

  1. 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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