Safe Harbor Casualty Loss Procedure For Residences With Deteriorating Concrete Foundations Modified


The IRS has modified the casualty loss safe harbor in Rev. Proc. 2017-60. The safe harbor applies to individuals whose personal residence has a deteriorating concrete foundation containing the mineral pyrrhotite. The IRS has extended the time for individuals to repair damage caused by the presence of the mineral pyrrhotite in concrete foundations.

Take away. Generally, to claim a casualty loss under the safe harbor in Rev. Proc. 2017-60, a taxpayer must have paid to repair damage caused by a deteriorating concrete foundation before January 1, 2018. However, under the new procedure, a taxpayer may treat the amount paid to repair damage that occurred before 2018 as a casualty loss on a timely filed form 1040X for the 2017 tax year if the taxpayer pays for the repairs before the last day for filing a timely Form 1040X for the 2017 tax year.

Casualty loss safe harbor

The safe harbor treats certain damage resulting from a deteriorating concrete foundation as a casualty loss and provides a formula for determining the loss amount. Therefore, the IRS will not challenge a taxpayer’s treatment of damage from a deteriorating concrete foundation as a casualty loss if the loss is determined and reported under the safe harbor procedure. The safe harbor is effective for federal income tax returns (including amended federal income tax returns) filed after November 21, 2017.

The safe harbor applies to taxpayers: (1) who obtained a written evaluation from a licensed engineer indicating that the foundation was made with defective concrete; and (2) requested and received a reassessment report showing that the reduced assessed value of the property is based on the engineer’s written evaluation and an inspection pursuant to Connecticut Public Act No. 16-45 (Act). Taxpayers with a personal residence outside of Connecticut may use the procedure provided the taxpayer has obtained a written evaluation from a licensed engineer indicating that the foundation was made with defective concrete containing the mineral pyrrhotite.

Modification to Rev. Proc. 2017-60

If a taxpayer paid to repair damage to his personal residence caused by a deteriorating concrete foundation during the 2016 tax year or earlier, the taxpayer may treat the amount paid as a casualty loss on a timely filed Form 1040X, Amended U.S. Individual Income Tax Return, for the tax year of payment. Further, if a taxpayer paid to repair the damage during the 2017 tax year or prior to a timely filed (including extensions) original Form 1040, U.S. Individual Income Tax Return, for the 2017 tax year, the taxpayer could treat the amount paid as a casualty loss on his or her original 2017 income tax return (or a timely filed Form 1040X for the 2017 tax year). Further, if a taxpayer paid to repair the damage after filing an original 2017 income tax return and prior to the last day for filing a timely Form 1040X for the 2017 tax year, the taxpayer could treat the amount paid as a casualty loss on a timely filed Form 1040X for the 2017 tax year.