Monday, January 9, 2006
Blackman v. Comissioner, 88 T.C. 677 (1987), is a staple in the basic income tax course. Soon after the taxpayer's employer re-located him out of state, his wife returned to the home state with their children. In a last-ditch effort to convince his wife to move back with him in the new state, he paid her a surprise visit and found another man living with her. He then
gathered some of [her] clothes, put them on the stove, and set them on fire. The [taxpayer] claims that he then "took pots of water to dowse the fire, put the fire totally out" and left the house. The fire spread, and the fire department was called. When the firefighters arrived, they found some of the clothing still on the stove. The house and its contents were destroyed.
The case illustrates the principle that gross negligence, but not ordinary negligence, bars a § 165(c)(3) casualty loss deduction. The Tax Court concluded that the taxpayer's actions constituted gross negligence and thus precluded a casualty loss deduction. In class, we explore the scope of the Tax Court's statement: "Once a person starts a fire, he has an obligation to make extraordinary efforts to be sure that the fire is safely extinguished. This petitioner has failed to demonstrate that he made such extraordinary efforts."
A man in Fort Sumner, New Mexico, caught a mouse inside his house. To dispose of it, he threw it on a pile of leaves that he was burning outside the house. The mouse, on fire, escaped from its hellish environment and ran back into the man's house. And somehow set it on fire. The firefighters, who claimed this was a first for them, determined that the mouse had run to a point underneath a window. Though the story doesn't explain what happened, I'm guessing that there were curtains on the window. The house, and everything in it, was destroyed.
The question for the students: was the man's actions ordinary negligence (thus permitting a casualty loss deduction) or gross negligence (precluding a casualty loss deduction)? Jim notes:
Was the man grossly negligent? Was the house fire a "foreseeable consequence" of tossing of a captured mouse into a pile of burning leaves? Would it matter if outdoor leaf burning was illegal? Ah, this question means that there is more information that is required. Some towns have permanent bans on outdoor leaf burning, and others impose temporary bans during droughts or periods of high fire risk. Considering the number of wildfires that pop up in New Mexico, this is more than a theoretical possibility. Is it against public policy to throw living mice into burning leaf policies? Did the man have a chance to extinguish the fire at the window? Did he try? Oh, if it matters, the man was 81 years of age. Maybe that matters. Maybe not.