Final answer:
The statement is false; a taxpayer electing to treat a casualty loss in a prior year is still subject to the 10%-of-AGI reduction, but it would be based on the prior year's AGI.
Step-by-step explanation:
If a taxpayer elects to treat a casualty loss as having occurred in the prior year, they are effectively electing to apply their previous year's Adjusted Gross Income (AGI) to determine the 10% AGI reduction for casualty losses. This could provide a tax advantage if the previous year's AGI was lower, thus lowering the 10%-of-AGI threshold and potentially increasing the deductible loss amount. However, it is important to note that special tax provisions, such as those related to federally declared disaster areas, may alter the usual tax treatment of casualty losses.
The statement "A taxpayer's home was destroyed by a storm in the current year. If the taxpayer elects to treat the loss as having occurred in the prior year, he or she will not be subject to the 10%-of-AGI reduction based on the AGI of the prior year." is false. The taxpayer would still be subject to the 10%-of-AGI reduction, but the reduction would be based on the prior year's AGI rather than the current year's.