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Involuntary Conversions

Useful definitions related to Revenue Rulings.

Casualty loss, deduction limited to basis
The allowable deduction for a casualty loss due to destruction of timber by hurricane may not exceed the adjusted basis for determining loss from the sale or other disposition of the quantity of timber which by fair and reasonable estimates is found to be unfit for use because of the hurricane. distinguished by Rev. Rul. 87-59. Treas. Reg. ¤ 1.165-7 (Sec 165).
Full Text: 66-9, 1966-1 C.B. 39

Casualty loss
The acquiescence in "Bessie Knapp et al.," regarding freeze damage to a citrus grove, was based on the interpretation that the taxpayer must prove physical damage to his land as a separate unit of property; however, the Court" s method of measuring the allowable loss is contrary to regulations and will not be followed.
Full Text: 71-254, 1971-1 C.B. 78

Casualty loss, partial damage
Ice storm damage to merchantable trees that reduces the rate of growth or quality of subsequent timber increment but does not render the existing timber unit for use is not a deductible casualty loss. Treas. Reg. ¤1.165-7 (sec. 165).
Full Text: 73-51, 1973-1 C.B. 75

Casualty loss due to flood damage
Property damage losses due to abnormally high water levels on bodies of water are deductible as casualty losses if they are directly attributable to a storm or other casualty and are not caused by gradual erosion or inundation from normal seasonal variations in water levels; however, amounts expended for construction of protective works or for moving homes from their original locations to prevent probable losses from future storms constitute capital expenditures rather than deductible casualty losses. Rev. Rul. 79 superseded.
Full Text: 76-134, 1976-1 C.B. 54

Casualty loss, insect
The death of ornamental trees 5 to 10 days following a massive southern pine beetle attack in an area not known for such massive attacks results in an allowable casualty loss deduction to the extent provided by Section 165 (c). Modifies Rev. Rul. 57-599. Distinguished by Rev. Rul. 87-59, Treas. Reg. ¤1.165-7 (Sec. 165).
Full Text: 79-174, 1979-1 C.B. 99

Casualty loss, nonrecognition of gain
The nonrecognition of gain provisions of Section 1033(a) are applicable to the proceeds received from the voluntary sale of timber downed by high winds, earthquake, or a volcanic eruption when the proceeds are used to purchase other standing timber. Rev. Rul. 72-372 revoked. Treas. Reg. ¤1.1033(a)-2 (Sec. 1033).
Full Text: 80-175, 1980-2 C.B. 230

Losses, timber in trees killed by insects
Loss of timber over a 9 month period following an unexpected and unusual insect attack that killed the timber trees gives rise to an allowable noncasualty business loss deduction that must be netted with other noncasualty Section 1231 gains and losses. Rev. Ruls. 66-9 and 79-174 distinguished. Amplified by Rev. Rul. 90-61. Treas. Reg. ¤¤1.165-1, 1.165-7, 1.611-3, 1.1231-1. (Secs. 165, 611, 1231).
Full Text: 87-59, 1987-2 C.B. 59

Losses, seedlings killed by drought
An unusual and unexpected drought that caused the death of tree seedlings planted for the commercial production of timber gives rise to allowable noncasualty business loss deduction that must be netted with other noncasualty Section 1231 gains and losses. Rev. Rul. 81-2 distinguished, Rev. Rul. 87-59 amplified. Treas. Reg. ¤¤1.48-1, 1.611-3, 1.194-1, 1.1231-1. (Secs. 48, 165, 194, 611, 1231).
Full Text: 90-61, 1990-2 C.B. 39

Casualty loss; Single Identifiable Property
Code Sec. 165: Casualty loss: Timber: Single Identifiable Property (SIP) damaged or destroyed: Damaged trees. Section 611--Allowance of Deduction for Depletion, 26 CFR 1.611-3: Rules applicable to timber. (Also ¤165; 1.165-7.) The Internal Revenue Service has reconsidered Rev. Rul. 66-9, 1966-1 C.B. 39, and Rev. Rul. 73-51, 1973-1 C.B. 75, in light of the decisions in Westvaco Corp. v. United States, 639 F.2d 700 (Ct. Cl. 1980), and Weyerhaeuser v. United States, 92 F.3d 1148 (1996), rev'g in part and aff'g in part, 32 Fed. Cl. 80 (1994), cert. denied, 519 U.S. 1091 (1997).
Full Text: 99-56, I.R.B. 1999-51