under casualty theft or lossess when itemizing on your taxes?

Question

does the cost of a vet bill of $13,000 due to your dog getting hit by a school bus count?

Answer 1

Potentially, yes; but probably only if the dog is used in some sort of dog-related business like shows or breeding, or if it is an extremely expensive dog.

The reason is because Form 4684 calculates your casualty loss based on the cost basis (what you paid for the item) minus the difference in FMV (the item's potential sales price between a willing seller and a willing buyer) IMMEDIATELY before the casualty and IMMEDIATELY after. Furthermore, the first $100 of personal property casualty losses is disallowed, and the losses are then further decreased by 10% of your adjusted gross income!

So for example: if you paid $1,000 for the dog (your cost basis) and reasonably could have sold the dog for $1,000 immediately before the accident (FMV before the casualty), one would assume that no one would want to buy it afterwards (FMV of $0 after the casualty) so you would have a loss of $1,000. If you had an AGI of $50,000, you would have to decrease your loss by $5,100 ($100 plus 10% of $50,000), leaving no deductible loss anyway.

The instructions DO state that "cost of repairs" can sometimes be used in determining the loss of value. But if you again go back to the "willing seller, willing buyer" part, I suspect that the dog is well worth the $13,000 to you personally, but not to anyone else. You would have the burden of proof (and the IRS would be likely to request it) that the dog truly was worth $13,000 of vet expenses. FMV is one thing; sentimental value is, unfortunately, another.

As I said at the beginning: if the dog is used in some income-producing activity, the circumstances would be different; check the form instructions below for business-related losses. Otherwise, please accept my apologies from one dog-lover to another, and I sincerely hope that it fully recovers; it is obviously a very special dog. :-)

Answer 2

Old 1940s case saying if a show dog was stolen it would be deductible. However a lost dog was not.

Not sure the case applies to today's IRC.

Answer 3

I'm not able to vote yet but if I was, Mr. Tax Preparer would definitely get five stars from me. I checked out the links. Very good information.