Personal theft casualty loss in Sept 2020 - Can it be claimed due to COVID federally declared disaster??

[josephfolsomcpa]

In September 2020 an older client was scammed out of $50,000 in a fake Publisher's Clearing House scam.  No money was recovered and will not be recovered and no insurance was received.  Under the current tax law, personal casualty losses can't be deducted unless its in connection with a federally declared disaster area.  We are in South Carolina which is under a federally declared disaster area due to COVID.  At first glance I was thinking there may be a possibility of taking this loss, but the current Publication 547 on page 17 says: "This expansion does not include those losses attributable to any major disaster which has been declared only by reason of COVID-19."  I'm reading this as to say that my client's casualty loss is not deductible since the declared disaster area was only declared due to COVID.  What does the group think?

[Just-Lisa-Now-]

Only losses from a federal declared disaster qualify for casualty losses since TCJA.

[josephfolsomcpa]

I completely agree with that.  The issue is that there IS a federally declared disaster area, but that declared disaster area is only because of COVID.

[Just-Lisa-Now-]

That loss wasnt due to the disaster.

[qbteachmt]

"We are in South Carolina which is under a federally declared disaster area due to COVID."

Everyone in the US is under that declaration. Then, you read what Qualifies as impacted by the disaster. Did you read Pub 547 or the instructions for Form 4684:

"A qualified disaster loss is now expanded to include an individual's casualty and theft of personal-use property that is attributable to a major federal disaster that was declared before February 26, 2021, by the President under section 401 of the Stafford Act and that occurred on or after December 28, 2019, and on or before December 27, 2020, and continued no later than January 26, 2021. However, this change does not include those losses attributable to a major disaster that has been declared only by reason of COVID-19."

You seem to be describing: My client was the target of fraud during the covid disaster. Not attributable to it.

[josephfolsomcpa]

That's the exact working in the publication that I believe disqualifies the loss.  I'm going to have to explain to the client and her daughter the reason for not being able to take the casualty loss so I just wanted to double check with some other professionals.

[qbteachmt]

"I'm going to have to explain to the client and her daughter the reason for not being able to take the casualty loss"

Fraud comes in many flavors. Try this one: If you paid a deposit to a shyster contractor to repair a roof damaged by a hurricane as a declared disaster, that would be different.

[josephfolsomcpa]

Great explanation!  Thanks