Yikes! A Casualty Loss!

In 2005, Justin Rohrs bought this nice, new truck, a 2006 Ford F-350, for $40,210.65. (Those who know me very well will perhaps know why that fact interests me.)

Anyway, a couple of months later, he went to a gathering at a friend's house where there was drinking, but he rode to and from it with someone else to avoid driving while intoxicated. After he got home from the gathering, though, he started off to his parents' house too soon. On the way, he didn't negotiate a turn --- he said there was a severe wind --- and the truck slid off the embankment, rolled over, and sustained harsh damage. Justin's blood-alcohol level registered 0.09 percent (the legal limit was 0.08 percent), so the police cited and arrested him. Justin filed a claim with his automobile insurance, but it was denied under the terms of his policy due to the DUI.

Ouch.

The next step for Justin, then, was to ask for a grace from the government in at least reducing his income taxes because of his casualty loss. He'd still have to pay for the damages, of course, or go without a truck, but at least he'd have his taxes reduced by being able to deduct his loss. He claimed a $33,629 casualty loss deduction for the damage.

IRS said no. Not only no, but they claimed that Justin was acting inappropriately by even claiming it. IRS asserted a penalty for Justin's inaccuracy.

Justin went to the Tax Court --- on his own (aka pro se).

The Income Tax Regulations provided that a crashed automobile could be a casualty loss if the damage wasn't due to a willful act or the willful negligence of a taxpayer, that is, of Justin. Justin said, naturally, it wasn't and that he wasn't willfully negligent; IRS maintained he was. IRS also said allowing Justin the grace would frustrate public policy.

Who won?

Justin did. It seems almost the very least that could/should be done considering the severe damage to his nice, new truck and the facts and circumstances of Justin's case.

Overall, the case is about analyzing the line between mere negligence --- which Justin admitted to --- and willful negligence and also what constitutes "the frustration of public policy."