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Blackman v. Commissioner - 88 T.C. 677 (1987)


Gross negligence on the part of the taxpayer will bar a casualty loss deduction. 


The Commissioner of Internal Revenue determined a deficiency of $22,737.38 in the petitioner's Federal income tax for 1980. The difference came from the petitioner setting fire to his wife's clothes, which resulted in the fire spreading and destroying his residence. The petitioner deducted the amount of the loss as a casualty loss of $97,853 attributable to the destruction of his residence and its contents. In his notice of deficiency, the Commissioner disallowed the deduction and made other adjustments. The Commissioner argued that the petitioner intentionally set the fire that destroyed his home in violation of Maryland's public policy, that allowing the deduction would frustrate that public policy, and that the petitioner is not entitled to a deduction for the damage caused by his fire.


Was Petitioner entitled to the deduction of the casualty loss resulting from the taxpayer's intentional setting of the fire?




The Court held that petitioner was not entitled to a deduction for a casualty loss because his conduct was grossly negligent and that his grossly negligent conduct barred him from the deduction. Nevertheless, under the circumstances of this case, it was not negligent or intentional disregard for the petitioner to claim a deduction for his loss by fire. However, petitioner's underpayment of taxes was not due to negligence under section 6653(a), therefore, the taxpayer was not liable for the addition to tax since he had reason for claiming the deduction for the casualty loss.

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