Miller v. Commissioner - 733 F.2d 399 (6th Cir. 1984)

Rule:

The plain language of I.R.C. § 165(a) supports the proposition that the timing of a loss transaction must be determined independent of insurance consequences.

Facts:

Appellee taxpayer deducted casualty losses arising from a boating accident on an annual tax return. In response, appellant Commissioner of Internal Revenue denied the deduction, ordering a deficiency judgment due and payable. The decision was mainly based on the fact that appellee never attempted to collect insurance monies. Accordingly, appellee brought suit in tax court asserting that he properly deducted his losses under I.R.C. §§ 165(a) and (c)(3). The court agreed and allowed the deduction despite the presence of insurance. Appellant challenged the decision arguing that allowance of such a deduction would create an impermissible tax shelter.

Issue:

Would insurance compensation act as a bar to taxpayer's deduction rights, notwithstanding the fact that the taxpayer voluntarily declined to obtain insurance compensation? 

Answer:

No.

Conclusion:

The appellate court affirmed the tax court's decision, holding that a literal interpretation of § 165(a) conveyed a congressional intent to calculate casualty losses independently of insurance. As a result, appellee was granted the deduction.