Theft Losses - business or income-producing property per the IRS
A theft is the taking and removal of money or property with the intent to deprive the owner of it. The taking must be illegal under the law of the state where it occurred and must have been done with criminal intent. The amount of your theft loss is generally the adjusted basis of your property because the fair market value of your property immediately after the theft is considered to be zero.
you can see why even deducting your loss if there was a business purpose for the shed could be difficult or impossible to sustain if the IRS were to question it. I'm not a lawyer but the key words are "illegal" and "criminal intent". if you wish to pursue deducting your loss consult a tax lawyer.
