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
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 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
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.