By: A.J. Cook

Burning a house down is no way to settle a marital dispute and no way to get a tax deduction.

Biltmore Blackman of Baltimore and his wife were having domestic difficulties. She refused to move with him to his new job location in South Carolina.

Once when he returned to their Baltimore home, he found another man with his wife, and the next night he found her having a party, according to his testimony in the Tax Court. He tried to get her guests to leave by breaking windows.

When Blackman returned to their home later, an argument with his wife ensued and she left. The distraught husband gathered some of her clothes, put them on the stove and set them on fire. Although he later said he tried to put out the fire, the flames spread until the house was destroyed.

Unable to collect fire insurance due to the cause of the fire, Blackman deducted $97,853 as a casualty loss on his tax return. The Internal Revenue Service found its attitude about the claim dampened by the fire.

In the Tax Court, the judge agreed with the IRS that Blackman's grossly negligent conduct barred a casualty deduction. The judge added, "We refuse to encourage couples to settle their disputes with fire."

The Moral: Don't fight fire casually unless you want IRS to burn your deduction.

Like a model husband, William Carpenter was doing domestic chores in the kitchen. In his frenzy to dispose of the dirty dishes, he poured the contents of a glass down the disposal.

Nancy, his wife, had put her $1,000 diamond ring in the glass of ammonia to clean it. It was worth only $30 after being chewed up in the disposal.

The Cleveland Heights, Ohio, residents tried to persuade the IRS to accept a casualty deduction. But the agents viewed this deduction as garbage, contending negligence caused the loss.

A Tax Court judge took a different view. He allowed the loss, even though it may have been caused by negligence. But in a warning to other taxpayers, he added: "We do not mean to say that one may willfully and knowingly sit by and allow his property to be damaged and still get a casualty deduction."

The Moral: A diamond is the hardest substance in the world

Some casualty loss cases are convoluted affairs that involve uncovering who did what to whom and when. Irvin and Sima Hayutin's problem began with faulty construction by a plumbing contractor. A plumbing company employee who was called to make repairs added to the problem. By then they were up to their necks in sagging walls.

For the first year and a half after the couple built their 10

The rest is a soggy story indeed. Water leaked under the house, causing floors, walls and the fireplace to crack. Exterior walls tilted and door frames sagged.

The Hayutins deducted a casualty loss on their tax return and sued the plumbing company. Although they won their suit, they were still out $7,346.

The IRS refused to settle on such a shaky foundation, insisting there's no deduction for faulty construction.

The Tax Court judge disagreed with IRS. While improper construction was an element of the problem, the damages occurred after the plumber stepped on the pipe. That negligent step, which set in motion the events which cost the Hayutins so much money, was the main cause of the damage. And that made the damages an acceptable deduction.

The Moral: A journey to thousands of tax deductible dollars begins with a single misstep.

A.J. Cook is a lawyer and CPA. His tax column appears weekly in numerous newspapers. Why isn't it published in your hometown newspaper? Ask its Business Editor to subscribe.

Copyright © 1987-2001 A.J. Cook All Rights Reserved
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Released 3-7-88