LOSSES
A major tax break for securities traders cannot be elected retroactively, the Tax Court says. Traders who want to treat their holdings as if sold at the end of the year can claim any losses from the deemed sale as ordinary losses for tax purposes, without regard to the $3,000 annual ceiling on net capital losses. But to make an election for a year, they must do so by mid-April...the filing deadline for the previous year. A late filed election won’t fly if the trader is using hindsight to benefit from the election, in the Court’s view (Kohli, TC Memo. 2009-287).
Casualty losses on rental property aren’t passive losses, the Tax Court says. Losses from fire, storm, theft or similar events don’t count toward the $25,000 limit on deductible passive losses (Agosto, TC Summ. Op. 2009-191). On the flip side, however, any gain resulting from the insurance proceeds will not be passive income. Drinking and driving can mix for tax purposes, according to the Tax Court. A drunk driver who totaled his pickup can claim a casualty loss deduction, in its view, because his actions weren’t grossly negligent. Although he had arranged to be driven home from a party where he’d been drinking, he later thought he was OK to drive elsewhere. His vehicle slid off the road and rolled over, and he was arrested for drunken driving because his blood alcohol reading was just over the legal limit.
His insurer denied his claim because of the arrest. The Court let him deduct the loss because it said that he had tried to act reasonably (Rohrs, TC Summ. Op. 2009-190). The Court would have nixed the deduction if he had driven right home from the party with a high blood alcohol level and had an accident. That would be gross negligence.
A major tax break for securities traders cannot be elected retroactively, the Tax Court says. Traders who want to treat their holdings as if sold at the end of the year can claim any losses from the deemed sale as ordinary losses for tax purposes, without regard to the $3,000 annual ceiling on net capital losses. But to make an election for a year, they must do so by mid-April...the filing deadline for the previous year. A late filed election won’t fly if the trader is using hindsight to benefit from the election, in the Court’s view (Kohli, TC Memo. 2009-287).
Casualty losses on rental property aren’t passive losses, the Tax Court says. Losses from fire, storm, theft or similar events don’t count toward the $25,000 limit on deductible passive losses (Agosto, TC Summ. Op. 2009-191). On the flip side, however, any gain resulting from the insurance proceeds will not be passive income. Drinking and driving can mix for tax purposes, according to the Tax Court. A drunk driver who totaled his pickup can claim a casualty loss deduction, in its view, because his actions weren’t grossly negligent. Although he had arranged to be driven home from a party where he’d been drinking, he later thought he was OK to drive elsewhere. His vehicle slid off the road and rolled over, and he was arrested for drunken driving because his blood alcohol reading was just over the legal limit.
His insurer denied his claim because of the arrest. The Court let him deduct the loss because it said that he had tried to act reasonably (Rohrs, TC Summ. Op. 2009-190). The Court would have nixed the deduction if he had driven right home from the party with a high blood alcohol level and had an accident. That would be gross negligence.
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