Disaster Casualty Loss

[TaxFL]

I have a Casualty Loss claim due to a Hurricane disaster to file. Facts below. Hoping for some input please!

Scenario

Elderly single parent owns condo purchased for $128,000 many many years ago

2022 Hurricane damaged the home significantly - federally declared disaster loss area

Facts:

• Parent considered selling home just before storm and realtor appraised around $200,000 - she cannot locate docs
• 2022 county Tax roll states value at $148,000 before storm 2021 is higher
• 2023 county tax roll value stated at $37,000
• decrease in value is $111,000 (full casualty loss amount)
• repair estimates received for $65,000+$10,000 pd in 2022 not repaired currently
• No insurance on the property

In researching the values noticed on the property tax roll that both mom and son's names are listed as "Joint Tenancy with Right of Survivorship"- A joint tenancy in Florida has all the features of the tenancy in common except that all the joint tenants must have the same equal percentage of interest in the real property

For Tax return

1. Casualty loss is the $148,000-$37,000 = $111,000  Using property tax records since no official appraisal was completed 
2. Does the fact both names are listed require the Casualty Loss to be split evenly on each separate return for mom and son (regardless of who pd for the property) Pub 547 pg10 - thus causing each 4684 Casualty loss to be subject to $100 deduction and 10% AGI on each return? They added the son's name simply to transfer ownership automatically when departed. 

Son does not live or stay in her home and has a separate residence counties away. Does his name on the property cause this much reconsideration or am I overthinking it and should just put it all on her return.

Thanks and I appreciate your thoughts on this!

[qbteachmt]

Geez, I started this reply at least 3 times, but keep getting lost.

Okay, no one has died, but...Basically, JTROS means when one listed owner dies, the other person(s) gets that share regardless of heirs. TIC means the share is subject to inheritance, not the details on the title. You can read a bit here:

https://www.alperlaw.com/florida-asset-protection/tenants-by-the-entirety/

Their intent for putting him on the title isn't what happened. He was gifted ownership of this personal property, and thereby, basis. Was that processed as such?

You included a lot of inapplicable detail. Inheritance is not part of the issue; ownership is. No insurance, not applicable. What happened to the $10,000 that someone paid someone?

You didn't name the hurricane. You didn't identify if this is qualified. You mention "Hurricane disaster." "A qualified disaster loss is similar to a casualty loss but may provide more favorable tax deductions. Not every federally declared disaster is known as a qualified declared disaster." from: https://www.investopedia.com/terms/d/disasterloss.asp

You can read "claiming the loss" here:

https://www.irs.gov/taxtopics/tc515

Hope that helps.

[BobKamman]

If the repairs cost $75,000, that would be the amount of the casualty loss.  Parent is the owner --- substance over form.  Since that's shown by facts and circumstances, some might argue otherwise.  

[qbteachmt]

"Since that's shown by facts and circumstances, some might argue otherwise."

Stupid facts; always getting in the way.

[TaxFL]

Sorry if that it was confusing and appreciate the replies.

To help clarify the facts

Ownership was just identified when I was searching the tax records for values. Elderly client indicated it was her home with no thought of the second name on the title. When questioned she found the original title and it lists both names in 2003

If I am reading the response correctly, the ownership is shared since both name on the title and thus the casualty loss would need to be split equally, Is that correct?

It is not a qualified disaster so didn't include that in the facts and maybe should have to clarify. The hurricane does have a Federal disaster # assigned though so eligible for casualty loss

The rules indicate the loss is claimed in the year of disaster.  Repairs not made yet was including facts for the repair "estimate" $65k + the $10k paid by client to HOA in 2022. For comparison to the loss in value. The formula in the IRS code sighted seems to indicate the loss in value minus insurance proceeds is the casualty loss amount ($111k). Wanted to confirm I am interpreting that correctly. Do you agree?

No gift recorded when purchased and both names added although the parent paid full amount and added both names.

Summary of the questions:

1) Do you agree the loss is $111k (148k-37k change in value)?

2) Agree loss should be split by co-owners? thus 1/2 on sched A for each of the two owners returns -10% Agi  and $100 deductible. The basis would be adjusted as well. Or able to all go on moms return based on substance over form?

I really appreciate the replies and facts. First Hurricane loss claim with this ownership issue and want to make sure it is correctly filed .

[BobKamman]

No, I don't agree with any of that, and I am suspicious of leading questions propounded as if I'm being cross examined.  The initial set of facts here is a shell game -- why are you quoting county tax rolls, when an appraisal from before the casualty is available?  And what is the property worth now?  Is she still living there? 

You really want us to forget you mentioned the $65,000 repair costs.  But that is the amount of the loss.  Just because she doesn't have the money, doesn't mean she gets to walk away with 100% of her basis.  If she isn't still living there, is it on the market?  For how much?  What does the Realtor say, who provided the $200,000 figure just before the event?  

[sjrcpa]

Also, it seems the son's name is on there "for convenience" and he doesn't/hasn't shared in the benefits and burdens of ownership so nothing should go on his return.

[qbteachmt]

I am also still circling the issue of the loss, because an estimate of $65k to repair it doesn't result in a tax loss of $111k. If that $65k would restore it, then it would have no diminished value condition, which is what you seem to be doing with that math difference. As for the payment of $10k to the HOA, it isn't clear why that was owed and paid. It could be normal, everyday, HOA operations; they get assessment-happy sometimes.

[TaxFL]

Thanks for the help and discussions!

 I was struggling with not having "hard" numbers to claim the loss . The repair cost is an estimate and the realtor quote was from someone whom provided information on a piece of paper that was destroyed in the hurricane and owner can't remember the realtors name now, so she has no documentation of the the prior value to calc the reduction. The values she has are only the numbers are the property tax records. So was seeking advice on which to use for the loss calc which is claimed in the year of the storm per IRS guidance. She had no insurance to recover any of the loss and should be allowed to claim the loss.

The HOA fee was a hurricane damage assessment for the outside common areas of the property used

Happy preparing to all!

[qbteachmt]

"The values she has are only the numbers are the property tax records."

Red herring.

You cannot turn a $65k estimate to repair into a $111k tax loss. That's basic math.

You told us this is condo. You have some comparables, then. It's not a one-off Hemingway FL Keys estate. Someone needs to do some research and seek out info, other than old county records and, "I sort of recall..."

"The HOA fee was a hurricane damage assessment for the outside common areas of the property used"

So, not part of this taxpayer's loss, then.

Throwing more text and too many inapplicable facts into the picture doesn't override the only applicable issues.

Last time I worked on a residential sale (inheritance, previous owner died and had owned in since the mid-1960s) in FL, I found that Pinellas county keeps everything on public record web-accessible. I pulled the most recent 6 months of sales in the same neighborhood; I filtered by a date-range of construction, by characteristics such as "has pool" and "no pool", etc. I had a wonderful list of 6 comparables and a two-line graph, because you know covid made everything crazy. I also pulled all the building permits and built basis from that listing.

Have you considered hiring someone to do this work, if you can't and your client can't?

[BobKamman]

Since she owns a share of the common areas, the assessment for those damages would be part of her loss, assuming they were used just to restore the property and not to improve it.  Which maybe isn't a good assumption, because they may be doing something to prevent another loss.