Blackman v. Commissioner
88 T.C. 677 (Tax Ct. 1987)

  • Blackman got into an argument with his estranged wife. In a rage, he took all her clothes and burned them in a fire. The fire got out of control and burned down the entire house.
    • Blackman was not convicted of arson, but his house insurance refused to pay for the loss.
  • When Blackman filed his taxes, he took a deduction for a casualty loss for the damage to the home.
    • 26 U.S.C. 165(c)(3) allows for deductions due to property losses, including losses from fires.
  • The IRS denied the deduction. Blackman appealed.
    • Blackman argued that he had definitely lost property, so he should get the deduction.
    • The IRS argued that is intended to cover unlucky people, not negligent people, so if you are partially at fault, you can't take the deduction.
  • The Tax Court found for the IRS and denied the deduction.
    • The Tax Court noted that the negligence of the taxpayer is not a bar to the allowance of the casualty loss deduction.
      • See Anderson v. Commissioner (81 F.2d 457 (1936)) and Shearer v. Anderson (16 F.2d 995 (1927)).
    • However, the Court also noted that gross negligence on the part of the taxpayer will bar a casualty loss deduction.
      • Heyn v. Commissioner (46 T.C. 302 (1966)).
    • In this case, the Court found that Blackman's actions amounted to gross negligence and therefore didn't qualify for a deduction under 165(c)(3).
    • The Court also found that allowing a casualty loss deduction, in this factual setting, would severely and immediately frustrate the public policy against arson and burning, and against domestic violence.
  • Basically, this case says that you can claim a casualty loss deduction under 165(c)(3) even if you are negligent, but not if you are grossly negligent.