I bought a boat to offer it for short term rentals (I already do so for other property). On the day I picked it up to bring it to its new home marina, while in transit the boat stalled and couldn't start back up (I ended up having to call the Coast Guard). Thankfully it drifted ashore and I was able exit the boat and tie it down; a snow storm had also started during the ordeal, so I left to wait out the storm. Two days later, after the storm, I went back to find the boat sunken. It was a total loss (and more -- I had to pay for disposing of it, but since this all happened in December, the additional costs ended up hitting the following tax year). My question is, would the boat qualify as a business property casualty given that I hadn't yet rented it to anyone? Thanks in advance!
If the boat was titled to the business, claiming it as a business casualty loss should not be a problem. (I would think) Your losses would be claimed on the tax return for the tax year they were actually incurred.
Thank you so much Carl.
That's the thing, this all happened en route after just picking up the boat, so the title hadn't been settled -- it was just signed over to me by the owner, so not in the name of the business. I was thinking about this in terms of a residential rental property and its 'in service date'. Does the same concept apply for business casualties?
You may take a deduction for casualty losses to your rental property (these are business casualties) only to the extent that the loss is not covered by insurance. If the loss is fully covered, you get no deduction. You can’t avoid this rule by not filing an insurance claim. If you have insurance coverage, you must file a claim in a timely manner, even if it will result in cancellation of your policy or an increase in your premiums. If you have insurance and don’t file an insurance claim, you cannot obtain a casualty loss deduction.
You must reduce the amount of your claimed casualty loss by any insurance recovery you receive or reasonably expect to receive, even if it hasn’t yet been paid. If it later turns out that you receive less insurance than you expected, you can deduct the amount the following year. If you receive more than you expected and claimed as a casualty loss, the extra amount is included as income for the year it is received.
For losses involving business-use property, refer to Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook. These workbooks are helpful in claiming the losses on Form 4684; keep them with your tax records.
Generally, you may deduct casualty and theft losses relating to your home, household items, and vehicles (NON-BUSINESS) on your federal income tax return if the loss is caused by a federally declared disaster declared by the President. Topic No. 515 Casualty, Disaster, and Theft Losses