Discussion:Private Investigator Fees for casualty/theft loss claim???

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You hit an interesting point. However, those type of expenses do not qualify for the casualty deduction for a couple of reasons. One, the expenses did not adjust the basis until after the casualty, making it problematic to claim that adj as part of the loss. Two, the costs were not a qualifying loss caused by a casualty (sudden force major, etc...) You hit an interesting point. However, those type of expenses do not qualify for the casualty deduction for a couple of reasons. One, the expenses did not adjust the basis until after the casualty, making it problematic to claim that adj as part of the loss. Two, the costs were not a qualifying loss caused by a casualty (sudden force major, etc...)
-Theft loss is a different case from casualty loss. I'm less certain of pre/post theft line when it comes to adj basis. Judging from the regs, there appears to be the presumption that stolen property is irrecoverable (FMV is zero after the event). Therefore I'm inclined to argue that the line is drawn when efforts to retrieve the property are abandoned or pointless.}}+Theft loss is a different case from casualty loss. I'm less certain of pre/post theft line when it comes to adj basis. Judging from the regs, there appears to be the presumption that stolen property is irrecoverable (FMV is zero after the event. also cf 1.165-1(d)(3)). Therefore I'm inclined to argue that the line is drawn when efforts to retrieve the property are abandoned or pointless.}}

Revision as of 01:06, 18 April 2009

Discussion Forum Index --> Basic Tax Questions --> Private Investigator Fees for casualty/theft loss claim???
Discussion Forum Index --> Tax Questions --> Private Investigator Fees for casualty/theft loss claim???

Illini (talk|edits) said:

16 April 2009
Had lunch today with another financial advisor and one of his clients suffered a theft:

His client had his condo down in Florida cleaned out by a moving van and professional thieves.

He had to hire a private investigator to track down the loot that was discovered stored in a warehouse under lock and key. The police would not or could not go in without any evidence, so the private eye "broke the case" for his client to recover some of his lost possessions.

Many possessions were not recovered, so he has a theft loss to claim -- what about the private investigator fees? Can those be added to basis of those items that were not recovered? Or are they not deductible no matter what?

Great question I thought.

Brock And Associates (talk|edits) said:

16 April 2009
Take a look at publication 547 http://www.irs.gov/publications/p547/ar02.html#en_US_publink100022595 . See section 'Figuring Decrease in FMV — Items Not To Consider'


"Related expenses. The incidental expenses due to a casualty or theft, such as expenses for the treatment of personal injuries, for temporary housing, or for a rental car, are not part of your casualty or theft loss. However, they may be deductible as business expenses if the damaged or stolen property is business property."


Keeping with the spirit of the ruling, I would have to say no. Additionally in the examples cited, nothing of the kind shows up.


The lost possessions wouldn't be part of the credit nor would any reimbursements from insurance for the unrecovered pieces...but you knew that. I am Captain obvious!


Michael

TheTinCook (talk|edits) said:

16 April 2009
To be deductible as a theft loss, you'd have to be able to include it in the stolen items adj basis. Fees paid to defend title are an adj to basis. Seems like it could be a similar thing.

Brock And Associates (talk|edits) said:

17 April 2009
That's a hard call....


Thinking of the mortgage world, fees paid for title search and insurance are normal and customary parts of real estate transactions.


Private investigator fees....I dunno. If it were my return, I might try it. For a client who might sue me, nah not worth it.


Michael

RoyDaleOne (talk|edits) said:

17 April 2009
You must increase your basis in the property by the amount you spend on EXPENSES that restore the property to its pre-casualty condition. At the least you would increase the basis in the items that were recovered by the cost of such recovery. Items that were not recovered would not receive such an adjustment. On the other hand, allocation of the expense of attempted recovery might be correctly allocated over all the items that an attempt was made to recovery.

IRS4LIFE (talk|edits) said:

17 April 2009
Sounds like a "no"... but what's the worst that could happen?

TheTinCook (talk|edits) said:

18 April 2009
"You must increase your basis in the property by the amount you spend on EXPENSES that restore the property to its pre-casualty condition. At the least you would increase the basis in the items that were recovered by the cost of such recovery. Items that were not recovered would not receive such an adjustment. On the other hand, allocation of the expense of attempted recovery might be correctly allocated over all the items that an attempt was made to recovery."

You hit an interesting point. However, those type of expenses do not qualify for the casualty deduction for a couple of reasons. One, the expenses did not adjust the basis until after the casualty, making it problematic to claim that adj as part of the loss. Two, the costs were not a qualifying loss caused by a casualty (sudden force major, etc...)

Theft loss is a different case from casualty loss. I'm less certain of pre/post theft line when it comes to adj basis. Judging from the regs, there appears to be the presumption that stolen property is irrecoverable (FMV is zero after the event. also cf 1.165-1(d)(3)). Therefore I'm inclined to argue that the line is drawn when efforts to retrieve the property are abandoned or pointless.

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