26 C.F.R. § 20.2054-1

Deduction for losses from casualties or theft

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A deduction is allowed for losses incurred during the settlement of the estate arising from fires, storms, shipwrecks, or other casualties, or from theft, if the losses are not compensated for by insurance or otherwise. If the loss is partly compensated for, the excess of the loss over the compensation may be deducted. Losses which are not of the nature described are not deductible. In order to be deductible a loss must occur during the settlement of the estate. If a loss with respect to an asset occurs after its distribution to the distributee it may not be deducted. Notwithstanding the foregoing, no deduction is allowed under this section if the estate has waived its right to take such a deduction pursuant to the provisions of section 642(g) in order to permit its allowance for income tax purposes. See further § 1.642(g)-1.

Notes of Decisions

Cited in 2 cases, 1996–1998 · leading case: Est. of Philip Meriano, Deceased, Anita Panepinto, Adm'x v. Comm'r of Internal Revenue Serv., 142 F.3d 651 (3rd Cir. 1998).

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Est. of Philip Meriano, Deceased, Anita Panepinto, Adm'x v. Comm'r of Internal Revenue Serv., 142 F.3d 651 (3rd Cir. 1998). “See 26 C.F.R. § 20.2054-1 . Since the estate has not received any compensation from Reardon other than the $25,000, the estate may deduct the remainder of Reardon’s debt, notwithstanding its agreement with Reardon to accept an undisclosed lesser amount.”

Est. of Harden v. Comm'r, 1996 T.C. Memo. 488 (Tax Ct. 1996). · cites it 2× “Petitioner contends that the USM representative embezzled its $ 300,000 investment and that, for purposes of section 2054 , a theft occurred.”

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