Discussion:Casualty Loss-Construction Defect?

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Discussion Forum Index --> Tax Questions --> Casualty Loss-Construction Defect?

Gary622 (talk|edits) said:

15 February 2007
A homeowner hired a contractor to build a house from them. A year later, the homeowner found out that much of the work was not to code and homeowner will need to spend $150,000 to correct the contractors errors. They settled out of court, but only received $80,000. Do I have a casualty loss for the $70,000? I guess the question is does this qualify for "sudden" in the casualty loss definitions?

Riley2 (talk|edits) said:

15 February 2007
I see no casualty loss here since the "suddenness" test has not been satisfied. If the case had gone to trial and a judgment of $150,000 was entered, then the difference between the judgment amount and the actual amount collected could be a bad debt.

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