On December 10, the U.S. Tax Court allowed a man to write off thousands of dollars worth of damage after totaling his pickup truck while driving under the influence in a ruling on an appeal the man filed.
Deducting property damage isn’t unusual (usually claimed as a casualty loss deduction), but the circumstances of the case, which required that a judge determine if the driver was or wasn’t willfully negligent, are what set it apart.
The case also shows that disgruntled taxpayers can challenge the IRS, and win, on some unusual cases.
Additionally, the case points to a gap in the tax code. Jay Starkman, a CPA from Atlanta, says it may turn on the idea of willful negligence, but tax rules do not define what that means for casualty losses. He called the outcome “unusual.”
According to court documents, in 2005, Justin M. Rohrs purchased a 2006 Ford 350 pickup truck for $40,210. Months later he went to a gathering at the home of a friend. Expecting to be drinking, he arranged for a ride to and from the friend’s home. However, after returning home, he decided to drive to his parents’ house. On the way there, his truck slid off an embankment and overturned. He was arrested for DUI and taken to a hospital.
Rohr’s insurance company denied a loss claim due to his arrest and DUI citation. The IRS then turned down his claim for a $33,629 casualty loss deduction on his Form 1040. He then took the case to Tax Court, which decided differently.
According to the judge’s ruling, driving after drinking doesn’t amount to willful negligence in itself. Rather, he said, the level of intoxication and the quality of the driving have to be taken into consideration. Rohrs’ blood-alcohol content was measured at 0.09 percent, slighting above the legal limit of 0.08 percent.
The Tax Court was established by Congress under Article I of the U.S. Constitution. It is located in Washington D.C., but its judges travel around the U.S. to conduct trials in various cities. The court is a place taxpayers may go if they believe they have gotten a raw deal from the IRS.