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  1. #1
    Join Date
    Aug 2008
    Posts
    7

    Default IRS Audit Taxes to Pay Back

    Hello all,
    I have a question.
    I just had an audit for 2007 from the IRS. The person that prepared my taxes back in 2007 filled a 21K deduction for loss of value of property. In 2005 a hurricane hit my condo in Miami, FL, and I lost my tar paper(I am not sure that is the true name, its the film that water/weather proofs the roof), I am on the last floor. Since the roof lost its waterproofing water seeped in and one of the rooms of my 2 bedroom became a 1 bedroom, water was coming down everytime it rained, they try to do a temporary patch which didnt work, mold set in and the insurance took 2 years to fix the roof, for the last part of 2005, 2006 and 2007 half of my apartment was inhabitable due to no roof and mold. The person who filled my taxes deducted $21K assuming that since the property(originally 172K) had loss its value(40% of the condo was unlivable(mold and water leaking)). On the IRS audit they said that since I didnt have to pay any money out of my pocket say the $21K I didnt have the right to file this as a deduction. Now if I had to sell my apartment I would have take a loss since 40% of it was unusable. Now is there a case here or not, the person who filed my taxes says that I do, the IRS auditor says that since this is a theoric loss it doesnt apply. any ideas? I have a week and half to answer the IRS, either agree to pay the $5K or appeal or go to court. I am not trying to beat the systems by no means, I just wanted this to be over. any ideas

  2. #2
    Join Date
    Oct 2006
    Posts
    16,474

    Default Re: IRS Audit Taxes to Pay Back

    Quote Quoting Foxtrot
    View Post
    Hello all,
    I have a question.
    I just had an audit for 2007 from the IRS. The person that prepared my taxes back in 2007 filled a 21K deduction for loss of value of property. In 2005 a hurricane hit my condo in Miami, FL, and I lost my tar paper(I am not sure that is the true name, its the film that water/weather proofs the roof), I am on the last floor. Since the roof lost its waterproofing water seeped in and one of the rooms of my 2 bedroom became a 1 bedroom, water was coming down everytime it rained, they try to do a temporary patch which didnt work, mold set in and the insurance took 2 years to fix the roof, for the last part of 2005, 2006 and 2007 half of my apartment was inhabitable due to no roof and mold. The person who filled my taxes deducted $21K assuming that since the property(originally 172K) had loss its value(40% of the condo was unlivable(mold and water leaking)). On the IRS audit they said that since I didnt have to pay any money out of my pocket say the $21K I didnt have the right to file this as a deduction. Now if I had to sell my apartment I would have take a loss since 40% of it was unusable. Now is there a case here or not, the person who filed my taxes says that I do, the IRS auditor says that since this is a theoric loss it doesnt apply. any ideas? I have a week and half to answer the IRS, either agree to pay the $5K or appeal or go to court. I am not trying to beat the systems by no means, I just wanted this to be over. any ideas
    I think that the IRS may be correct in this instance.

    Casualty losses have to do with out of pocket expenditures to return a property to its original value, OR permanent loss in value as a result of the casualty.

    It sounds like you had no out of pocket expenses, and it sounds like you have suffered no permanent loss in value as a result of the casualty.

    What case law or other cites has the tax professional provided to back up your position on the alledged loss?

  3. #3
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    2,344

    Default Re: IRS Audit Taxes to Pay Back

    The IRS will accept either out of pocket cost to repair, or a certified appraisal to determine the amount of a casualty loss. You must reduce the loss by the amount of insurance reimbursement. If you can get an appraiser to document and certify the value of your property immediately before the storm (from historical records or what ever they are allowed to use) and then document the value immediately after the storm damage then you would have the documentation that would be acceptable to the IRS. Otherwise, the casualty loss will be disallowed.

  4. #4
    Join Date
    Aug 2008
    Posts
    7

    Default Re: IRS Audit Taxes to Pay Back

    Hello all,
    thanks for the answers, how can I get information about the appraisals, I know I didnt do one, the county did an appraisal for tax purposes, maybe the insurance did an appraisal after the hurricane in order to verify how much they were paying the condo association, I am not sure, can I ask for this information to the insurance company? where else can I get an appraisal from before?

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