In late October, Hurricane Sandy caused significant damage to
many businesses throughout the Northeastern United States. In the
past, business taxpayers experiencing similar storm damage would
have focused primarily on the loss provisions of Section 165 to
address tax concerns. The tax questions that would have been asked
following such a casualty would have been limited to whether a loss
could be claimed and the amount of any loss deduction.
However, the IRS issued temporary regulations under Section 162
last December that address the treatment of costs associated with
tangible property, commonly referred to as the "2011
Regulations" or the "repair regulations," in which a
questionable casualty loss provision was included.1 With
this change, the government has limited certain repair deductions
that taxpayers could otherwise claim if the repairs arise with
respect to property for which a casualty loss deduction has been
taken. As a result of this position, some
