A Tax Reduction for a House - Research Paper Example

Section 165(a) provides that, in computing taxable income under section 63, any loss sustained during the taxable year and not made good by insurance or some other form of compensation shall be allowed as a deduction subject to any provision of the internal revenue laws which prohibits or limits the amount of the deduction. This deduction for losses sustained shall be taken by section 165 and the regulations thereunder.
Analysis
Issue 1: The house qualified for a tax deduction in the taxable year 2009 more than two years ago and thus it is disqualified for a tax deduction in this taxable year 2012 by Reg. Sec. 165(d)(1).
Issue 2: The house was destroyed by a natural disaster and thus qualifies for tax deduction Sec. 165(a).
Conclusion
Although it appears that Martin qualifies for tax reduction in the taxable year 2009 this is not the case for the year 2012. It is unclear whether a claim for reimbursement exists in Sec. 165(d)(2). If it exists then it can be used according to Sec. 165(d)(2)(i). On the other hand, if it does not exist, no deduction is allowable. Read More