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Estates can deduct casualty losses

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in Small Business Tax

Q: After my father passed away, investment property he owned was destroyed by fire. The insurance reimbursement didn't cover the actual loss. Can his estate deduct the difference? E.R., Fairfield, Calif.

A: Yes. But the rules for nonbusiness casualty and theft losses also apply to estates and trusts. That means the estate can only deduct the loss amount that exceeds 10 percent of the estate's adjusted gross income (AGI). The estate's administration expenses may be deducted in computing its AGI. For more details on this topic, obtain a copy of IRS Publication 547, Casualties, Disasters, and Thefts, at http://www.irs.gov/pub/irs-pdf/p547.pdf or by calling (800) 829-3676.

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