J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

18.14 Personal and Business Use of Property

For property held partly for personal use and partly for business or income-producing purposes, a casualty or theft loss deduction is computed as if two separate pieces of property were damaged, destroyed, or stolen. Follow the steps for figuring the allowable loss (18.13), but apply the $100 and 10% of adjusted gross income floors only to the personal part of the loss.

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Caution

Incidental Expenses

Expenses that are incidental to a casualty or theft, such as medical treatment for personal injury, temporary housing, fuel, moving, or rentals for temporary living quarters, are not deductible as casualty losses.

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EXAMPLE

A building with two apartments, one used by the owner as his home and the other rented to a tenant, is damaged by a fire. The fair market value of the building before the fire was $169,000 and it was $136,000 after the fire, which damaged both apartments equally. Cost basis of the building was $120,000. Depreciation taken before the fire was $14,000. The insurance company paid $20,000. The owner has adjusted gross income of $40,000. This is his only loss this year. He has a business casualty loss of $6,500 and a deductible personal casualty loss of $2,400 figured as follows:

Business	Personal
1. Decrease in value of building:
Value before fire ($169,000)	$84,500 ...