If your property is covered by insurance, you must file a timely insurance claim for your loss. Otherwise, you can’t deduct the loss as a casualty or theft. Did you do so?

Actually I am not sure you need that. If you buy a property for 100 and sell it for 50, there is a loss of 50 right there anyway. No matter the cause.

You can't deduct a loss of 50 just "because". Assuming no insurance or claim filed, can they deduct the loss in value at sale time?

A couple of other notes, just in case they were to apply to you:

The FMV of the property, and the Adjusted Basis are two items that factor into the Casualty Loss.  So your Casualty Loss may not necessarily be $178,000.

The Casualty Loss lowers your Basis, so keep that in mind when you report the sale.

Hey all , Thanks. I do have other adjustments to the loss, like clean up. demo and minor insurance payment. I am ware of the cost basis adjustment when I report the sale in 2018. There will not be a gain since the sale price and adjustments are far below  the  $500,000 exemption.