Discussion Archives:Casualty Loss, Property with debt.

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Discussion Forum Index --> Advanced Tax Questions --> Casualty Loss, Property with debt.

Discussion Forum Index --> Tax Questions --> Casualty Loss, Property with debt.

Douglasholbrook (talk|edits) said:

15 July 2009
Client buys a piece of raw land for $200K ($30K down and $170K IO mortgage). Two years later, when the property is worth $210K, an atomic bomb is dropped there and the land is now worthless, a casualty loss. I know the loss is limited to the $200K basis, but would the $170K, if forgiven, be an "insurance or other reimbursement" and reduce it to $30K?

Also, timing wise, if the bomb goes off in year 1 and the debt isnt forgiven until year 3, would I have a $200K loss in Y1 and COD income in year 3?

No, this isnt homework. I just wanted to use a stark example to apply to my client's fact pattern.

Thanks, guys.

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