Tuesday, April 2, 2013

Blackman v. Commissioner case brief

Blackman v. Commissioner case brief summary
88 T.C. 677 (Tax Ct. 1987)

-Blackman and his wife got into an argument.
-In a fit of anger, Blackman took all her clothes and burned them in righteous fire.
-The fire spewed out of control and burned down the house.
-Blackman somehow was not convicted of arson, however his insurance ardently refused to exhume money for the loss.
-When Blackman filed his taxes, he marked a deduction for a casualty loss for the damage which was caused to the home.
-The IRS denied the deduction.
-Blackman appealed.

26 U.S.C. §165(c)(3) allows for deductions due to property losses, including losses from fires.
-You can claim a casualty loss deduction under §165(c)(3) even if you are negligent, but not if you are grossly negligent.

-Blackman argued that he had definitely lost property, so he should get the deduction.
-The IRS argued that the deduction is actually intended to cover unlucky people, not negligent people, so if you are partially at fault, you can not take the deduction.

The Tax Court found for the IRS and denied the deduction.

-Negligence of the taxpayer is not a bar to the allowance of the casualty loss deduction.
Also see: Anderson v. Commissioner (81 F.2d 457 (1936)) and Shearer v. Anderson (16 F.2d 995 (1927)).
However, the Court stated that gross negligence on the part of the taxpayer will bar a casualty loss deduction.  Heyn v. Commissioner (46 T.C. 302 (1966)).
-The Court found that Blackman's actions amounted to gross negligence and therefore didn't qualify for a deduction under rule §165(c)(3).
-The Court further found that allowing a casualty loss deduction in this case would severely and immediately frustrate the public policy against arson and burning, and against domestic violence.

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