M and his wife are Kansas wheat farmers.This November he suffered a casualty loss when his entire crop was destroyed by a flash flood, resulting in a $40,000 loss.Thankfully, none of his personal belongings were damaged.In order to help farmers in his area obtain low interest loans and provide them with other relief, the whole town in which he lived, including his farm, was declared a disaster area.M's A.G.I.last year was $30,000 due to the terrible drought.This year he anticipates his A.G.I.to be over $130,000 before the casualty.M should deduct the loss in the prior year.

Question

Quizplus · Accepted Answer

M should not automatically deduct the loss in the prior year without considering other factors such as the specific tax benefits of deducting in the current year versus an amended prior year return, and the specific IRS rules regarding casualty losses in federally declared disaster areas. Taxpayers often have the option to deduct a casualty loss in the year the casualty occurred or amend the previous year's return, but the best choice depends on individual circumstances and potential tax benefits.

M and His Wife Are Kansas Wheat Farmers