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$1 million, $10 million -- it's just an estimate!

December 22, 2008

While estimates are part of the tax law - depreciation being but one example -- sometimes the IRS is unwilling to accept an estimate. Like in Tax Court today:

Petitioner timely filed her returns relating to 2003, 2004, and 2005. On each return, petitioner claimed a $10 million theft and casualty loss relating to a stamp collection, U.S. savings bonds, and other personal property.

You'd think she'd have gotten a safe deposit box after the first $10 million loss.

Petitioner contends that her savings bonds, stamp collection, and other personal valuables were stolen and that her home was damaged by a flood. There is no credible evidence, however, supporting petitioner’s contentions and claimed deductions. In fact, petitioner acknowledged that "My putting $10 million dollars each year from 2003-2205 [sic] was just an estimated amount". Accordingly, we sustain respondent’s determinations.

We can draw important lessons here:

1. Secure your valuables.
2. Insure them.
3. If you claim $10 million in theft losses in three successive years, the IRS may notice.

Cite: Mayewsky, T.C. Memo. 2008-286 (If that link fails, click here).

Tags: tax court.