Code Section 165 authorizes write-offs for casualty losses. But what about casualty losses caused by willful acts or willful negligence, such as deliberately set fires or drunken driving? The courts agree with the IRS that the tax code bars any deductions for those kinds of losses.
Consider, for instance, a case involving an arsonist with inflamed passions. The Tax Court rejected a deduction claimed by Biltmore Blackman for the destruction of his home as a result of a fire admittedly set by him. The court decided that allowance of the write-off would frustrate public policy.
The scenario opened with Biltmore’s job transfer from Maryland to South Carolina, where he relocated with his wife and five children. South Carolina turned out not to be to her liking, and she moved with the children back into the couple’s former residence in Baltimore.
Fast-forward to Biltmore’s return to the Baltimore dwelling on a Labor Day weekend. What he hoped to accomplish was to win back his estranged mate and persuade her to give South Carolina another chance. The visit led to his discovery of another man living there with her. Worse yet, he found out from neighbors of the paramour’s presence there on other occasions when Biltmore was away on business trips.
About Julian Block
Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes” (Wall Street Journal), and “an authority on tax planning” (Financial Planning magazine). More information about his books can be found at julianblocktaxexpert.com.