USA Casualty/Theft loss related to stolen comic books - uncertain date or value

[Michigan-Guy]

As a teenager I collected comic books. I have a dozen large boxes of comics. I never tracked exactly what I had, but 20 years ago I sorted the most valuable into a single box. I stored these casually in my basement for a long time. This summer I decided to catalog them to see what I actually have. I found that the box of most valuable comics was missing. I know it was in my possession when I moved to a new home 10 years ago. I have to suspect some contractor who was doing work in my home (we've had a few shady characters) stole that box. I don't even remember exactly what was in the box. However I am quite certain of two of the comics, two #1 issues in near mint condition. One is currently worth $20,000 (if the condition was certified), the other worth $12,000. I believe I had many other valuable comics there (though it is not completely certain which ones) bringing the value of the whole box to $50,000 - $100,000.

I discovered the items missing in 2018. I am wondering if I can claim a deduction for the theft loss on schedule A for my 2018 return, and if so, for how much, and what would I need to do to make this valid and stand up to legitimate IRS scrutiny. Thanks for the wisdom!

 

[bklynboy]

Good luck proving that loss. You will need proof you actually owned them and what you paid, proof that a theft occurred (maybe someone just threw them out?), police reports, proof of condition, etc especially for the value you will claim. First question any reasonable person will ask why put such valuable items in a box in your basement? Why did you not insure them if they were valuable? Based on what you describe you will not be allowed this deduction.

 

[Michigan-Guy]

I'd be more than willing to file a police report if it would help.

Good luck proving that loss. You will need proof you actually owned them and what you paid, proof that a theft occurred (maybe someone just threw them out?), police reports, proof of condition, etc especially for the value you will claim. First question any reasonable person will ask why put such valuable items in a box in your basement? Why did you not insure them if they were valuable? Based on what you describe you will not be allowed this deduction.

 

[bklynboy]

Its more than that. Can you prove you bought them and the condition they were in? Can you prove it was a theft (someone was arrested)? You need evidence as IRS will not just accept a claim of theft otherwise anyone can claim a theft. Standard will be high so make sure you can support you owned the item, prove it was in the condition you claim, prove someone stole it and not just misplaced/accidently discarded. Police report by itself is not meeting the standard since anyone can file a report - it doesn't prove anything was stolen.

Bear in mind here are restrictions even if you can prove theft. Must exceed 10% of AGI, limited to LOWER of cost basis and FV. IRS has been adamant that you need to prove cost even if they accept a theft occurred to support the deduction.

 

[Michigan-Guy]

This is very helpful and the info I needed. My cost basis is probably under $1000 in 1974, so I guess that pretty much kills the whole idea.

Bear in mind here are restrictions even if you can prove theft. Must exceed 10% of AGI, limited to LOWER of cost basis and FV. IRS has been adamant that you need to prove cost even if they accept a theft occurred to support the deduction.

 

[bklynboy]

Check with a tax pro though because I have see court rulings where cost was ignored when evidence existed that value was much higher. Its not always black and white - what I am giving you are the rules the IRS tends to follow (usually to their benefit) but in court cases there have been judgments that favor the filer - depends on your individual facts and the strength of what you can prove.

Good Luck!

 

[Michigan-Guy]

There are so many items in play here... No proof of ownership, no proof of condition, cost vs market... It seems like a long shot, but the potential (legitimate) tax savings would be quite substantial.

If I did include this, is there a link to a (simple) article on what kind of proof the IRS requires to be sent? Not counting should I be audited. I assume if I was audited my deduction would probably be disallowed unless I wanted to go to court, which would not make financial sense.

As for why I stored them in my basement with no insurance.... They were dry and safe there, I thought. I did not think about it very hard honestly. Seems pretty stupid, looking back.

Check with a tax pro though because I have see court rulings where cost was ignored when evidence existed that value was much higher. Its not always black and white - what I am giving you are the rules the IRS tends to follow (usually to their benefit) but in court cases there have been judgments that favor the filer - depends on your individual facts and the strength of what you can prove.

Good Luck!

 

[bklynboy]

You can start here - there are a lot of articles on this topic and I recall some of the rules changed due to Trump tax reform starting in 2018. I no longer do taxes so am not sully up to speed - if you use a tax preparer anyway just walk them through it and based on their experience can give more specific recommendations based on your circumstance.

Guidance will not specify what proof is needed but burden is always on you if challenged by IRS which is why I suggest making sure you have the right paperwork as this is fairly large and likely trigger their review of your tax return.

Topic no. 515, Casualty, disaster, and theft losses | Internal Revenue Service

Topic No. 515 Casualty, Disaster, and Theft Losses

www.irs.gov