Taxpayer Mavis Marble was involved in an auto accident in which she hit a pedestrian and that pedestrian later died. The pedestrians estate sued Ms$.$ Marble for wrongful death and her insurance company paid to the limit of her policy $($$$200,000).$ Ms$.$ Marble paid an additional $$300,000$ from her own funds. Ms$.$ Marble would like to take a casualty loss deduction for $$300,000.$

Issues:

$1.$ Can amounts paid by the taxpayer, from her own funds, beyond the limit of her auto insurance policy, to an estate for a wrongful death claim arising out of an auto accident involving the taxpayer, be a casualty loss under the federal income tax law?

$2.$ Would the loss be deductible as a personal or business casualty in $2023$ under current tax law if the auto accident occurred in $2023?$

Answer rating: 100% (QA)

1 Under federal income tax law amounts paid by the taxpayer beyond the limit of her auto insurance p... View the full answer