BeBe Hassell is a successful tax attorney in New Orleans, Louisiana. She purchases a vacation home, or “camp” on Lake Pontchartrain, just north of the city, to enjoy on the weekends with her husband, Gabe, and four children. Gabe is a professor of journalism at the University of New Orleans. Because of poor reception, she and Gabe install a tall, 30 foot antenna tower alongside the camp, at a cost of $4,000.00. They notice over a period of five years, that the tower is battered by wind and waves, and tilts more each year and the metal is weakened a bit more each year by the salty brackish water and the salt air. The tower becomes visibly in poor condition. Almost five years to the day after the tower is installed, there is a near-miss from a hurricane and no great damage is done, except their tower is toppled and ruined. Nearby neighbors with newer towers mostly find that their towers survived the storm, although a couple of the new towers of nearby camps also had their towers destroyed by the storm, which was powerful enough to destroy even new towers if it happened to hit hard at that spot.
For a loss to count as a casualty loss deduction, it must be the result of a sudden, unexpected or unusual event, not a “wearing out” or deteriorating over time. Can BeBe and Gabe take a casualty deduction for this loss? Please do the following:
1. Research this on the internet, using IRS publications, Google or other search engine, and other sources you find on the internet.
2. Write a memo to the me, describing the situation, and also describing the results of your research. Restate the facts, then state what you see as the issue. Then describe the sources that you located that gave you good information on this issue, and describe what each resource said about this situation. If you can, cite the Internal Revenue Code section that discusses casualty losses.
3. Give your conclusion. Is the antenna loss deductible or not, and why or why not?