Casualty Losses

1
Casualty Losses

• Whats the single identifiable property (SIP)?

2
Loss Determination

• For timber thats destroyed its the lesser of,
• Basis of SIP, and
• Change in f.m.v. of SIP
• SIP no longer each individual unit volume of
  timber destroyed
• Now its the block

3
Whats the Block?

• An operation unit that includes all the timber
  which would
• Logically go to a single point of manufacture
• The historical criteria (circa 1919)
• Defined by geographical or political boundaries
• Easily defined
• Be included in a logical management area
• Current standard

4
SIP is Block?

• Thus, SIP is determined by taxpayers depletion
  accounting system
• If all timber is in one depletion account then
  block is all the timber owned
• If timber accounts are by tracts of land, stands
  within a tract, or some other breakdown, timber
  in each account is a separate block.

5

• . . . there is no case precedent or guide to
  follow in deciding whether a particular block
  designation is logical. We think it appropriate
  to make this decision on a standard of
  reasonableness based upon a facts and
  circumstances standard. In other words, we will
  consider petitioners history, plans, actions,
  and any other relevant circumstances in order to
  determine whether the block in question is a
  logical management area and/or meets the
  standards of the regulations and intent of the
  statute. (RLC Industries Co. v. Commissioner, 98
  TC 457, affg. CA-9, 58 F3d 413)

6
Aggregate or Disaggregate?

• Factors to consider
• Likelihood of casualties
• Differences in bases of tracts acquired over time
• Order in which various tracts and timber types
  will be harvested
• Cost to maintain large number of depletion
  accounts