Featured News 2013 Theft Deductions and Building Contractor Fraud

Theft Deductions and Building Contractor Fraud

You have probably heard of a situation like this before: a homeowner hires an independent contractor to work on his home and complete a remodeling project. While the contractor starts out on the project with enthusiasm, as time progresses his performance starts to dwindle. Eventually, the contractor stops working altogether, leaving the project unfinished. In other situations, a contractor may tear down walls in your house and start a remodeling project, only to pass away suddenly.

While this is a tragedy, it is common for homeowners to discover later that the contractor was a drug addict, which is why he was self-employed. He had a lack of ability to get a job through a company, so he may have developed his own contracting business. Now, you are left with a half-finished house even though you have already made payments on the work. Both of these situations are considered contractor fraud, and this is a shockingly common occurrence in the United States.

According to Nolo, this can be a serious issue. You may lose a significant amount of money as a result of contractor fraud, and your home may be damaged from demolition or weather elements to the exposed parts of the house. Whether your contractor abandons the project, passes away, or eventually admits that he does not know how to complete the work, it can often be considered an act of fraud and you have the right to get the courts involved. In some cases, homeowners who are victims of contractor fraud can also get a theft deduction on their taxes from the IRS.

In one example, a couple was left with an unfinished home after their contractor died from a drug overdose at the age of 30. The couple sued the deceased contractor's insurer and settled for $10,000, and then asked for a theft deduction on their tax form. They claimed a $188,070 deduction, but it was denied.

The couple decided to appeal their case to the U.S. Tax Court, and upon doing so they were able to win the case. The original denial from the IRS claimed that the couple could not claim a deduction because their situation was not described as theft under the state law. Yet the U.S. Tax Court declared that the couple was robbed because they paid for a service that a contractor had no intention of carrying out.

In almost all cases, uninsured losses of property that are due to theft are tax deductible. For tax purposes, theft is any criminal appropriation of another person's property by swindling, false pretenses, and any other form of guile. This means that if you can show that you were lied to and deceived by a contractor, you can probably receive a theft deduction as a result. You cannot claim a theft deduction if the contractor does the promised work, even if it is of poor quality. For example, if your contractor paints a wall as asked, but does a poor job, this is not considered theft.

At most this can be considered negligence, or sometimes it can be listed as breach of contract. In these situations, you can probably sue the contractor personally for doing a poor job on the remodeling job. You can also sue for negligence if the contractor fails to preserve your home from weather damage using tarps and other weather-shielding options. If you need more information, then you can talk to a local real estate attorney about your case. Hire a real estate lawyer near you to discuss your contractor fraud situation and determine the best course of action to pursue damages and reimbursement for expenses.

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