The question appears to be does this qualify as a Casualty loss. Given the circumstances, that may be subject to opinion. I say it meets the "sudden, unexpected, or unusual" criteria. Even if it doesn't, it probably qualifies as fraud on the part of the contractor. I would claim a casualty loss on my return.
You can only deduct your losses that exceed 10% of your
AGI+$100. In
addition, it is an itemized deduction. If you usually take the standard
deduction, you'll have to now find additional itemized deductions to exceed the
standard deduction.
In TurboTax, enter at:
Federal Taxes Tab (Personal
for H&B version)
Deductions & Credits
-I’ll choose what I work on button
-Scroll down to:
--Other deductions & Credits
---Casualty & theft
Or type- casualty
loss -in the search box
For more info, see:
http://www.irs.gov/pub/irs-pdf/i4684.pdf
