Federal Income Taxation

Research Assignment: Federal Income Taxation Spring 2014

TP paid $1.2 million to have his second home constructed in Florida. On April 1, 2013 the contractor showed him the finished home and everything appeared to be in excellent condition. When TP visited the home on July 1, 2013, however, there was substantial damage from termite infestation. TP paid $300,000 to have the damage repaired and another $30,000 to have the home made termite proof. The construction contractor has no liability for either of these costs. TP, who had $500,000 in taxable income without regard to the termite damage, wants to deduct his costs as a casualty loss.

Write TP a letter explaining all of the likely consequences of deducting the costs of the termite damage as a casualty loss. The letter should be no longer than five double spaced pages with a 12 point. For this assignment, you should use the CCH Internet Tax Research Network.


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