The 9th edition of the Guide for Plant Appraisal refers to damage due to insects allowed as a casualty deduction by the IRS. In the past, it has been my understanding that insect and disease were specifically excluded for this purpose.

Does anyone know of any more information on this particular subject?

Carl

Reply to post by Carl Absher, on October 27, 2000 at 09:45:29:

“The progressive damage or destruction of trees shrubs or other plants by a fungus, disease insects, worms or other similar pests is not a deductible casualty loss. But a sudden destruction due to an unexpected or unusual infestation by beetles or other insects may result in a casualty loss (IRS 1998, 2).” (Emphasis added.) IRS Publication 547, Casualties, Disasters and Thefts (Business and Non-business. http://www.ustreas.irs.gov

Go to the library reference section and find the CCH Federal Tax Guide. Look up casualty losses and read the case references.

Reply to post by Carl Absher, on October 27, 2000 at 09:45:29:

One specific case Scott alludes to involoved the rapid loss of large trees (oaks, I think) due to a severe beetle infestation. The trees were killed in a matter of weeks, as I recall, and the courts ruled it was an allowable deduction. This is generally a rather extreme case, and you can probably expect IRS to challenge it.

Reply to post by Russ Carlson, on October 27, 2000 at 09:45:29:

There MAY also be a case where oaks were killed by two-lined chesnut borer which was characterized as "slow and progressive" and did not satisfy the requirements for casualty loss but it was established that t=lcb was a secondary pest that followed only because of the "sudden and identifiable event" of defoliation by gypsy moth larvae and therefor it was a casualty for IRS purposes. READ THE ACTUAL CASES.

I think it is important to point out that many deductions are claimed and never scrutinized and people think, as a result, that certain things are deductible because somebody gets away with it once in a while. But if a return is scrutinized - random audit, deduction's out of line with income, there are other specific problems, whatever - the specific IRS rules, regulations, rulings and court cases will apply and will govern.

Reply to post by Scott Cullen, on October 27, 2000 at 09:45:29:

Thanks for the responses.

Southern pine beetles are absolutely laying waste to the loblolly and shortleaf pines in our area. Along the Tennessee river many homes have been built on land that was reclaimed in the 30's and 40's by planting pines. The only large trees on many properties that have been built since then are pines and they are dead or dying.

I have incorrectly told some folks that tax deductions for the beetle damage are only for trees held for timber. Now, I am passing this information on for them or their accountants to use.

Carl Absher

Reply to post by Carl Absher, on October 28, 2000 at 14:27:09:

Remember a) the key will be whether there was a "sudden, unexpected and identifiable event," not simply whether beetles are involved, b) even if deductible there are loss limitation rules based on income and c) IRS recognizes only the value of real estate immediately after the loss deducted from the value immediately before as estimated by a qualified real estate appraiser.

Reply to post by Carl Absher, on October 28, 2000 at 14:27:09:

Here in Colorado, we had a terrible time with the
pine beetle back in the early 80's. I had a house
at 8,000 feet with 5 acres of pine and lost a lot
of the older trees. I live in Denver now, but it
appears the cycle is back, as some of the papers
are reporting here.