Tax File Memorandam - Assignment Example

According to Section 165(c) (3): Reg. §1.165-7, losses which can be in partial or complete damage of properties that are contributed due to storm, shipwreck or fire, or any other casualty are considered to be deductible casualty losses. Again, IRS Publication 547: Casualties, Disasters, and Theft [2013] demands that, any damage associated with any automobile accident becomes considered under a deductible casualty loss. It is when the automobile is used for either business or for personal use as stated in Reg. §1. 165-7(a) (3).

However, it is required that for a taxpayer to be able to claim the casualty deductible, the event that causes the casualty must be determined as sudden [see Rev. Rul. 72-592, 1972-2 CB 101]. A sudden event is required to be swift and happens very fast at ones. It is different from an even which is progressive and takes time gradually. We would consider that Georges automobile submerged into the frozen lake at ones and not gradually since it occurred within a short period. The event is qualified to be a swift, hence a sudden one.

George can only be denied the deduction if the court carries out its research well and finds out that it is through Georges negligence, (W.H. Carpenter v Commr, 25 TCM 1186, Dec.28.148 (M)), that his automobile was submerged and destroyed (Reg. §1. 165-7(a)(3)(i)). However, under the circumstance of sudden destruction of the automobile, including looting, fire or theft, George and any other taxpayer will be allowed a deduction. It is, therefore, determined that, in Georges case, the damage to the automobile was more likely than not, caused by a causality.

The determination could only occur if George were not aware of the possibility that the frozen lake could submerge. However, if it could be determined that George was aware of the possibility that the frozen lake could possibly submerge, and he went ahead to park his car on it, then the deduction could be denied due to