Pond Boss Forums INTRO Questions & Observations Claiming Pond Losses as a Tax Credit (2021)

Hello folks, I'm the OP from THIS thread, where I describe how a pond builder took $8500 of my cash, all of my valuable trees, and left me with a big hole on my property but no pond. I'm just starting to prepare my 2021 tax return, and a relative of mine said they thought I could claim this loss on my tax return. Excitedly, I ran to the internet to see what I could find on the subject.

Per the link from the IRS website: https://www.irs.gov/taxtopics/tc515, it states:

Generally, you may deduct casualty and theft losses relating to your home, household items, and vehicles on your federal income tax return if the loss is caused by a federally declared disaster declared by the President. You may not deduct casualty and theft losses covered by insurance, unless you file a timely claim for reimbursement and you reduce the loss by the amount of any reimbursement or expected reimbursement.

They define "Theft Loss" as: A theft is the taking and removal of money or property with the intent to deprive the owner of it. The taking must be illegal under the law of the state where it occurred and must have been done with criminal intent. The amount of your theft loss is generally the adjusted basis of your property because the fair market value of your property immediately after the theft is considered to be zero.

I'm just looking for some opinions and insight into this matter. Would I have a valid claim on anything related to my property and monetary losses? This is the first year of filing my taxes as a new homeowner, and I don't want to put a bunch of suspicious claims on my tax return and have the feds hunting me down.

Update:It appears that, as of 2018, the IRS no longer allows you to claim personal property theft or loss on your taxes, unless it was in a Presidentially-declared natural disaster. Argh!! Back to the drawing board...

Consult a tax attorney?

Yeah, that'll probably be the next step. I was just hoping to get lucky and find someone on this forum with any sort of tax experience, specific to ponds and/or land clearing, property damage, claiming theft, etc.

I would in no way be qualified to give you any advice on the subject but if I were in your shoes, a conversation with a good tax consultant or CPA could be well worth the money. imo
It might not be considered a theft as much as a loss or expense incurred in your future fish farming biness.

Our tax guy said we could write off the pond construction cost. You might be able to do it that way.

I forget if you did, but I'd think you could if you had paperwork to back it up, like a police report.

I am not a CPA, but I believe most of the "construction" type work on your farm can be deducted, but it depends on your situation.

Ours is reported under Form 4835 - Farm Rental Income and Expenses.

We have income on our farm (our share of the wheat crop, hay sales, etc.). Our fertilizer costs, land improvement costs, etc. are deducted from the income. In the years that expenses exceed income, I believe the excess expenses can be carried over to future years.

I don't believe these losses can be taken against your "ordinary income". I don't know how much of this description would apply in your specific situation.

[I also don't know if my description is technically correct - we have had a CPA prepare our taxes for many years.]

If you are living on your land, then that may bring in some more tax accounting options. Improvements to your property around your house are deductible in certain situations, especially when they increase the value of your property.

I agree with the other posters that you should have a CPA examine your situation. You could probably call one and pay a consulting fee for their advice, if you still prefer to file your taxes yourself.

You are correct. I plugged the loss into the whole farming section of my tax return just to see what it would do, and it added nothing to my return, since I don't have any farming profits to claim.

@esshup - Yes, I have a police report on the guy to back up my claim, but from my research, you can't claim personal money losses or theft on your return as of 2018. It has to be from a federally declared natural disaster. The current Covid pandemic is listed as such, and has a FEMA code to enter on your tax return. I don't think I could say the guy stole my money and trees due to Covid, could I?

I am scratching my head wondering how a dirt pusher "stole" your trees and money. I presume you hired them, paid $8500 for a pond, but it failed to hold water? If this is the case, you may have a civil claim (probably a weak one), but the "criminal intent" element seems elusive...again, if hired, the only possible criminal intent I could think of would be intentional fraud...Did the trees get sold by the dirt pusher?

I posted the link to the thread with the discussion on how he "scammed" me. No, it wasn't anything to do with a leaky pond. Long story short, he quoted me $10k for a 0.6 acre pond, took a $2500 down payment, and several other smaller payments for various "excuses" such as "I have too many jobs out right now and not enough money coming in, can you float me another X amount of money and I promise it'll get done this week?" etc. Stupidly, I gave him the money. He took the $8500, and all of my valuable trees that were supposed to go to the lumber mill for me, and got out of Dodge.

He's a known con artist, and soon after he quit showing up to my property, I found that there was a warrant for his arrest from a previous person he scammed.