- The Washington Times - Monday, May 17, 2004

At tax time, you get only limited consolation if your car is damaged or stolen and the loss is not covered by insurance. The snag is a two-step computation for uninsured casualty or theft losses resulting from fires, accidents, thefts or similar events. Those losses are deductible only if they amount to more than 10 percent of your adjusted gross income, which is the amount listed at the bottom of Page 1 of Form 1040. Moreover, there’s no write-off for the first $100 of each casualty or theft loss. There are other restrictions. For example, you are entitled to a deduction for damage from, say, a crash caused by an icy road or a collision caused by your faulty driving (or someone else operating your car) or the other driver, provided the damage did not result from your willful act or willful negligence. “Willfulness” includes drunken driving. Casualty losses have been denied for tire blowouts caused by overloading and motor damage caused by an oil-line leak, but allowed for damage resulting from a child pressing a starter button and the freezing of an engine after an accident. The Tax Court agreed with the IRS that no casualty-loss deduction or, for that matter, any write-off at all, should be allowed for damages to a person’s lifestyle caused by suspension of his driver’s license. Was your car a “lemon” from the day the dealer handed you the key? That, say the courts, does not entitle you to a casualty-loss deduction when you trade it in. Nevertheless, a bona fide casualty loss is allowable even under odd circumstances. Take the case of Abraham Hananel, who returned from a visit to friends to discover that the auto he had parked in a tow-away zone had been towed away. Even worse, the city failed to identify the owner and, as authorized by law, crushed the car. According to the IRS, no deduction should be allowed because Mr. Hananel ought to have foreseen the consequences of selecting the particular parking space. The IRS’ reasoning failed to convince the Tax Court, which responded that Mr. Hananel could have anticipated that the city might move the car, but not that it would become scrap metal. In calculating your allowable casualty loss for a personal car, do not include these items: towing charges, the cost of renting a replacement car or legal fees to defend against a suit for negligent operation of your vehicle. The deduction is available only to the owner of the damaged property. Thus, even if you get stuck with the bill, there’s no write-off for damage or destruction of a car registered in your child’s name. This was made clear to the Omans, a Maryland couple who gave their 20-year-old son the money to buy a sports car that he registered in his name. Before he even acquired collision coverage, one of his friends totaled the car. When filing time rolled around, the couple claimed a casualty loss. But the Tax Court sided with the IRS and threw out their deduction. Because they kept no strings on the gift to their son, the car — and the casualty loss — was his. • Julian Block can be reached at julianblockyahoo.com. UNITED FEATURE SYNDICATE

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