Final answer:
A casualty loss is deductible on an individual's tax return if it results from a sudden, unexpected, or unusual event like a natural disaster. The loss must be proven and incurred within the tax year, and is subject to limitations such as insurance recovery and adjustment for gross income.
Step-by-step explanation:
The statement is true, an individual may deduct a loss on personal property on their tax return only if it meets the definition of a casualty loss. According to the IRS, a casualty loss can result from the damage, destruction, or loss of property from any sudden, unexpected, or unusual event such as a storm, fire, car accident, or similar event. However, normal wear and tear or progressive deterioration is not deductible as a casualty loss.
To claim a casualty loss deduction, the loss must be caused by a casualty event that is identifiable, damaging to the property, and sudden, unexpected, and unusual in nature. The taxpayer must also be able to prove the amount of the loss and that it was actually incurred during the tax year. Some factors that can affect the deductible amount include insurance reimbursements and whether the loss exceeds 10% of the taxpayer's adjusted gross income.
An individual can only deduct a loss on personal property if it qualifies as a casualty loss, which occurs from sudden and unexpected events but not from wear and tear. Deductibility is contingent on substantiation of the loss and certain limitations based on adjusted gross income and insurance recovery.