Pub 547

Casualty

   A casualty is the damage, destruction, or loss of property resulting from an
   identifiable event that is sudden, unexpected, or unusual. 

        A sudden event is one that is swift, not gradual or progressive. 
        An unexpected event is one that is ordinarily unanticipated and unintended. 
        An unusual event is one that is not a day-to-day occurrence and that is not
        typical of the activity in which you were engaged. 

   A casualty can also include a government-ordered demolition or relocation of a
   home that is unsafe to use because of a disaster. See Disaster Area Losses, later. 

   Casualty losses can result from a number of different causes, including: 

        Earthquakes 
        Hurricanes 
        Tornadoes 
        Floods 
        Storms 
        Volcanic eruptions 
        Shipwrecks 
        Mine cave-ins 
        Sonic booms 
        Vandalism 
        Fires. If you willfully set the fire, or pay someone else to set it, you cannot
        deduct the resulting loss. 
        Car accidents. The loss from an accident to your car is not a casualty loss if
        your willful negligence or willful act caused the accident. The same is true if
        the willful act or willful negligence of someone acting for you caused the
        accident. 
        Other accidents. A loss due to accidental breakage of china or glassware
        under normal conditions is not a casualty loss. Neither is a loss due to
        damage done by a family pet. 

   Nondeductible losses. There is no casualty loss deduction if the damage or
   destruction is caused by: 

        Termites or moths 
        Disease, insects, etc. The progressive damage or destruction of trees,
        shrubs, or other plants by a fungus, disease, insects, worms, or similar pests
        is not a deductible casualty loss. But a sudden destruction due to an
        unexpected or unusual infestation by beetles or other insects may result in a
        casualty loss. If a storm, flood, or fire damages trees and shrubs, the loss is a
        casualty. 
        Progressive deterioration. If a steadily operating cause or a normal
        process damages your property, it is not considered a casualty. For
        example, the steady weakening of a building due to normal wind and
        weather conditions is not a casualty. But, the rust and water damage to rugs
        and drapes caused by the bursting of a water heater qualifies as a casualty.
        The deterioration and damage to the water heater itself does not qualify. 
        Drought. In most cases, when drought causes damage or loss through
        progressive deterioration, it is not a casualty loss. To be deductible, a
        drought-related loss generally must be incurred in a trade or business or in a
        transaction entered into for profit.