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Muddy Waters Case Summary

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• Facts. The client Muddy Waters owns personal residence, north of Indianapolis on the White River. Mrs. Waters bought this home because it was located on the river where her family could boat and fish. Mrs. Waters purchased the home five years ago for $500,000. Due to industrial pollution of the river, thousands of fish were killed and now the water is inhabitable. Mrs. Waters family does not feel safe going into the river. It remains unknown how long the river will stay this way. The residence itself has not incurred any physical damages. Mrs. Waters was unaware of any possible pollution problem that could occur following the purchase of the residence. Mrs. Waters has confirmed that the property is insured and that no claim on the property as been issued or awarded. Mrs. Waters has no intent to sell the residence within the next five years, and has yet to have the residence properly appraised. Mrs. Waters figures her property has dropped in value by approximately $200,000. Mrs. Waters is filing a joint a return with her husband and wants to deduct the $200,000 as a casualty loss.
• Issue(s). Can Muddy Waters deduct the $200,00 in casualty losses of her personal residence due to the industrial water pollution to the river on her property?
• Analysis. …show more content…
Owens, 305 U.S. 468, which the ruling states in order determine the loss of the home due to a casualty loss, the house is valued at its fair market value the day before the incident not valued at its cost to the client. Mrs. Waters is claiming that the loss she is incurring is that of $200,000 is as a result of the current value being only $300,000 as compared to the day the home was purchased it was $500,000. From Helvering v. Owens supra it can be noted that this would not be an accurate claim and that Mrs. Waters would need a pre-incident appraisal to accurately identify the amount of the loss, which she has not done. Therefore the stated loss of $200,000 would not be

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