Over the years, it was expanded and now applies to disasters at any time of the year, whether or not casualties as normally defined. It can apply to the disaster declared for the COVID-19 pandemic.
That disaster has caused the loss of many businesses. Stock has become worthless because of the pandemic and the declared disaster. Losses that otherwise will be reported for 2020 can be reported for 2019, when it is likely that the taxpayer had income and can obtain a refund. This is not a loss carryback but an actual relocation of the Section 165 loss deduction to the prior year.
Guidance may be coming from Treasury on the application of Section 165(i) to a non-natural disaster. Meanwhile, taxpayers should consider its use and availability.
For more information, please contact Jack Cummings at 919.862.2302.
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