The IRS has done something unexpected: they have extended a tax break without the mandate of Congress!
What break is that? Foundation deterioration due to the use of pyrrhotite in the concrete mix. They are now allowing for homeowners to claim this loss through Rev. Proc. 2017-60. Sec 165 of the tax code defines a casualty as losses arising from fire, storm, shipwreck, or other casualty, or from theft. Casualty is further defined as something sudden, unexpected, and unusual. Foundation deterioration clearly does not meet this definition. But the IRS has declared that they will allow foundation deterioration due to pyrrohotite in the concrete mixture, if the requirements are met.
The taxpayer must get a written evaluation from a licensed engineer indicating that the foundation was made with defective concrete, as well as a reassessment report showing the reduced reassessed value of the residential property based on both the engineer’s written evaluation and an inspection.
The loss is limited to the taxpayer’s adjusted basis in the property, but this is further affected by whether they have pending claims for reimbursement. If the taxpayer has no such claims, and has no plans to pursue them, then they may claim as a loss all the unreimbursed amounts paid during the taxable year. If they have a pending claim, or intends to pursue such a claim, then the loss is limited to 75 percent of the unreimbursed amount paid during the taxable year. If the taxpayer has been fully reimbursed, then they cannot claim a loss.
This is a tax break for very few people, but those who qualify for it desperately need it! I think we need to give the IRS a clap on this one, as they are giving a break to people who really need it.