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Tax
Implications - When to Deduct
a Losss
Casualty losses
are generally deductible only in the year in which they occur. However,
losses in presidentially declared disaster areas are subject to
different rules.
Leased property:
If you lease property from someone else, you can deduct a loss on
the property in the year your liability for the loss is fixed. This
is true even if the loss occurred or the liability was paid in a
different year. You are not entitled to a deduc- tion until your
liability under the lease can be determined with reasonable accuracy.
Your liability can be determined when a claim for recovery is settled,
adjudicated, or abandoned.
Net
operating loss (NOL): If your regular deductions and your casualty
or theft loss deductions are more than your income for the tax year,
you may have a Net Operating Loss (NOL). The casualty loss deduction
is taken during the year it occurred, even though there is no immediate
tax benefit. An NOL can be carried back or carried forward and deducted
from income in other years to gain the tax benefit from the casualty
loss.
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