Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 70-16

1970-1 C.B. 36

Sec. 165

IRS Headnote

A loss sustained on the sale of a residence condemned as part of the site for flood prevention construction is not a deductible casualty loss; A.R.R. 1819 superseded.

Full Text

Rev. Rul. 70-16 /1/

A taxpayer purchased certain land and erected thereon a residence for his personal use. Several years later, because of flooding in the area, the state legislature enacted a law providing for the establishment of state conservation districts for the purpose of flood preparation by means of constructing large retention basins and dams. Under the law the taxpayer's property was condemned for inclusion in one such basin, and he sold it at a loss to the conservation district. The taxpayer's property was not physically damaged by the flooding in the area.

Held, since there is no proximate relationship between the flooding and the loss on the sale of the residence, the loss is not deductible as a casualty loss under section 165 of the Internal Revenue Code of 1954.

A.R.R. 1819, C.B. II-1, 92 (1923), is hereby superseded since the position set forth therein is updated and restated under the current statute and regulations in this Revenue Ruling.

/1/ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.