Ask The California Employment Tax And Payroll Tax Attorney – How To Lose Your Casualty Loss Deduction
By Robert S. Schriebman
2023
Introduction
Some losses may be deducted on your state and federal income tax returns. In order for a loss to be deductible, there has to be a statute allowing the loss. Internal Revenue Code 165 and its California counterpart RTC §19045 allow for the following losses:
- Losses incurred in a trade or a business
- Losses incurred in any transaction entered into for profit though not connected with a trade or business.
- Casualty losses – those arising from fire, storm, theft, or other casualty.
B. Walker sought to deduct the casualty loss arising from winter storms in January and February 2017. The FTB denied the loss deduction, so Walker took his case before the Office of Tax Appeals (OTA). In the Matter of the Appeal of B. Walker, OTA Case No. 220610456.
The Only Problem … Walker Had No Substantiation
Walker brought his case before the OTA claiming winter storm losses but did not have any substantiation to prove one dime of loss. He claimed he incurred out-of-pocket expenses to repair significant flooding damage to his residence during a Governor-declared disaster in 2017. Walker also argued that his tax preparer filed the 2017 return without fully explaining the loss deduction and the preparer failed to respond to multiple requests from the FTB to provide supporting documentation. Walker admitted that he did not have any receipts for the repairs arising from the storm damage.
Going to court without any documentation to prove your case is a waste of everyone’s time. Blaming your tax return preparer for your own negligence gets you nowhere. As a matter of reality, as soon as you blame your tax return preparer, you have lost your case.
Conclusion
When claiming any kind of loss, you have to have the paper. You have to have objective proof such as photographs, an appraiser’s report, or eye-witness testimonies. Invoices and receipts win the day.
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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD, and he is not employed by the EDD or any other agency of the State of California.
Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
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