IRS guidelines have been issued aimed toward helping homeowners with computation regarding IRS tax treatment of amounts paid to repair damage to their personal residences resulting from corrosive drywall building materials.
The Internal Revenue Service issued guidance on 9/30/10 regarding relief to homeowners who have suffered property losses due to the effects of certain imported drywall installed in homes between 2001 and 2009.
A page on IRS.gov, entitled “IRS Provides Relief for Homeowners with Corrosive Drywall,” provides valuable links for the homeowner or tax preparer. Read the complete document, and click on the links provided on that page to obtain specific IRS guidance on this issue. To view the document, click here.
A portion of the information on that page
Revenue Procedure 2010-36 enables affected taxpayers to treat damages from corrosive drywall as a casualty loss and provides a “safe harbor” formula for determining the amount of the loss.
In numerous instances, homeowners with certain imported drywall have reported blackening or corrosion of copper electrical wiring and copper components of household appliances, as well as the presence of sulfur gas odors.
In November 2009, the Consumer Product Safety Commission (CPSC) reported that an indoor air study of a sample of 51 homes found a strong association between the problem drywall, levels of hydrogen sulfide in those homes and corrosion of metals in those homes.
For purposes of this revenue procedure, the term “corrosive drywall” means drywall that is identified as problem drywall under the two step identification method (click here) published by the CPSC and the Department of Housing and Urban Development in their interim guidance dated January 28, 2010 (click here).
Further details and limitations can be found in Revenue Procedure 2010-36 on IRS.gov.
The purpose of this Revenue Procedure is described as follows: “This revenue procedure provides guidance to individuals regarding the federal income tax treatment of amounts paid to repair damage to their personal residences resulting from corrosive drywall building materials.”
Please note that it is stated on this IRS website page that “a taxpayer who has been fully reimbursed before filing a return for the year the loss was sustained may not claim a loss. A taxpayer who has a pending claim for reimbursement (or intends to pursue reimbursement) may have income or an additional deduction in subsequent taxable years depending on the actual amount of reimbursement received.”
This is a complicated IRS matter, so a taxpayer may need to consult a tax advisor before making a claim for a loss due to corrosive drywall.
For photos of damage from Chinese drywall, click here.