Question

A calendar year taxpayer's home was destroyed by flood and was located in a town declared a federal disaster area. A casualty loss of $10,000 was figured under the usual rules. On what return can the casualty loss be claimed?

Answer 1

The casualty loss of $10,000 can be claimed on the taxpayer’s tax return for the year the flood occurred, or on an amended return for the prior year, potentially speeding up the refund and maximizing the tax benefit.

Step-by-step explanation:

The casualty loss of $10,000 due to a home being destroyed by a flood in a federally declared disaster area can be claimed on the taxpayer’s federal income tax return for the year in which the casualty occurred. If the taxpayer chooses, they may also claim the loss on an amended return for the prior tax year. This allows the taxpayer to potentially receive a quicker tax refund and can be especially beneficial if it results in a larger tax saving compared to claiming the loss in the year it happened.