If you steal, you must pay Income Tax on stolen Property – Complicated US Income Tax Laws!
“THE Tax Guide 2010 for Individuals”, published by the US IRS is full of wry humour and tries to help individual taxpayers to file their tax return through 295 complicated pages of the book. Even a Harvard professor of economics would find it difficult to sift through 295 pages to find his tax liability. Some pearls of wisdoms from the great IRS treatise.
Stolen property. If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you returned it to its rightful owner.
Thieves beware – the Police may let you off, not the IRS. Similarly Bribes are not exempted.
Bribes : If you receive a bribe, include it in your income.
Illegal activities : Income from illegal activities, such as money from dealing illegal drugs, must be included in your income.
Family Pet : Loss of property due to damage by a family pet is not deductible as a casualty loss.
Example : Your antique oriental rug was damaged by your new puppy before it was housebroken. Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss.
FMV of stolen property : The FMV of property immediately after a theft is considered to be zero, since you no longer have the property.
Example : Several years ago, you purchased silver dollars at face value for USD 150. This is your adjusted basis in the property. Your silver dollars were stolen this year. The FMV of the coins was USD 1,000 just before they were stolen. Your theft loss is USD 150.
It may not be worth the trouble to recover stolen property as you have to include the value in your income and file yet another complicated return.
If you survive Sonic Booms and Shipwrecks, you get a deduction, but if your house is eaten away by termites, you have no luck as the loss did not happen suddenly as in a shipwreck.
Incidentally in the US, a wife and husband can file a joint return, but if there is a divorce, each spouse will be individually and jointly responsible, even if the divorce settlement states that the other erstwhile partner is not responsible.
In addition to the tax payable, the IRS has asked the tax payers to make a contribution to reduce the public debt.