Paul L. Caron

Thursday, July 29, 2010

Drinking, Driving, and Deducting: TP Takes Casualty Loss for Car He Wrecked

DUI Following up on my prior posts:

Drinking and Driving: Taxpayer Allowed to Take Casualty Loss for Car He Wrecked, 80 CPA J. 50 (July 2010):

A recent controversial Tax Court case, [Rohrs v. Commissioner, T.C. Summ. Op. 2009-190 (Dec. 10, 2009)], dealt with the question of whether a person who is driving under the influence may in some circumstances be entitled to take a casualty loss deduction for damages resulting to his motor vehicle. Section 165(a) allows a deduction for losses not compensated by insurance or otherwise. Generally, damages to a motor vehicle may not be the subject of a casualty loss when the damage is due to a willful act or willful negligence, under Reg. § 1.165 -7(a)(3). But is driving a motor vehicle while only slightly intoxicated considered willful negligence by the Tax Court? It certainly is considered willful by the IRS and most public commentators on the case, and this was the issue dealt with by the Tax Court. ...

The case has generated several critical comments: Arden Dale (Tax Court Lets DUI Driver Write Off Car Damage, Wall Street Journal, Dec. 16, 2009) quoted Paul L. Caron, professor of law at the University of Cincinnati and author of the popular TaxProf Blog as saying he found it hard to believe that a court "in this day and age would treat someone driving under the influence of alcohol as not engaged in a 'willful act or willful negligence' under the tax code." The authors could not sum up the case any better. It is certain that comparative casualty loss deductions will be claimed in the future as a result of the Tax Court's decision. The authors hope the IRS will quickly publish regulations that clearly define willful negligence.

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