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I have some experience in IRS matters. Although I
usually charge for advice, after all I am a professional, my comments are
offered free to kindred souls. Highly principled readers may nevertheless pay
fair value, which I consider to be something a bit less than 2 cents. Certified
checks please.
1. Unless you are audited, anything goes. Cost of
repair vs change in value and any other issue you can imagine are moot,
unless you are audited.
2. Very few tax returns are audited, very few. But
there are a few items that flag returns for review by someone whose
responsibility is to decide whether this one should be audited or not. A
casuallty loss of 20,000 is likely to raise that flag.
3. In person, full return audits are expensive and
time consuming for the IRS. Such can be discounted in your case. However, there
is a reasonable probability you will receive a request for documentation of loss
on this specific item by mail, requesting a response by mail. Be prepared for
it. If it does not come within 4 years you are home free. (you CPAs out there, I
know fraud extends the liability period but that has no application to this
case).
4. Advice. Take the deduction for what you think is
fair. If there is a range that you think is fair, favor yourself. Save every
piece of paper that might be relevent. I wouldn't bother with appraisers,
but that's me.
I do my own taxes. I have been fully audited in
person four times. It's a stressful experience beforehand but to my delight
I found each auditor to be reasonable. It sounds to me like you are entitled to
a casualty loss deduction. Don't be intimidated into foregoing it. If the IRS
audits you, and if they don't see it as you do, pay up and complain to your
congressman. Like engine failure, it's unfair but thankfully very
unlikely.
Bob Barker
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