Toxic mold found in home- medical or casualty?

[joanmcq]

Client is on disability because of respiratory problems. Client bought a vacation home in the mountains in 2012 partially because valley smog is not good for her breathing, but she noticed she was having issues in the vacation house too. It was bought in the dry season but when it started raining, they noticed the roof leaked. When they pulled the roof up to repair it, black mold was found in the roof, in the insulation, and under the carpet in much of the house. The insulation, carpet, much of the subflooring, roof, etc. had to be replaced. the time between purchase and discovery of the mold was not more than a few months.

They had asked about roof issues when they bought the place but were told there were none. It was a short sale, as is, so there is no recourse available. Apparently the seller isn't worth suing for lying on the contract- no assets.

Can the repairs be taken as medical expenses? Or are we left with a casualty loss? She is still suffering from the exposure to the black mold.

[MsTabbyKats]

I would say that if the doctor recommended that the work be done, it's medical. it's the same logic of "building a ramp" to make a home wheelchair accessible.

[ILLMAS]

Here are some good points, it's seems it won't qualify medical or casualty loss.

http://www.taxalmanac.org/index.php/Discussion:Black_Mold_Casualty_Loss

[MsTabbyKats]

But, in this case the client already had breathing issues. In other words....she was already under the care of a physician, the ailment didn't start after she bought the home.

I still go with...get a letter from the doctor recommending the removal of the mold because of a pee-existing condition.

[Jack from Ohio]

I agree with MAS. Even if a doctor writes a "prescription" to remove the mold, it won't fly with an auditor. Even without the breathing problem, removing the mold would be considered maintenance or repair and would be done by anyone finding that condition in their home. In fact, some insurers will not insure a home if mold is present, or not removed when found.

I also believe that the mold issue has been through tax court and deemed not a casualty loss. The definition of casualty gets in the way.

[Lion EA]

Mold isn't sudden as required of a casualty. And even if you try it as medical, it can only be the excess over what increases the value of the home; and I would think all of what they are doing increases the value of the home from unsalable/uninsurable to useable.

It adds to their cost basis.

[MsTabbyKats]

Mold isn't sudden as required of a casualty. And even if you try it as medical, it can only be the excess over what increases the value of the home; and I would think all of what they are doing increases the value of the home from unsalable/uninsurable to useable.

It adds to their cost basis.

Yeah...makes sense.

I guess medical improvements (wheel chair ramp, lowering cabinets) would probably decrease the value of a home, unless the buyer also needed these accommodations.

[jainen]

>>They had asked about roof issues<<

Let's see.. She bought a house for a specific medical purpose but didn't bother to inspect it for that purpose. Reminds me of the old vaudeville joke. "Doctor, it hurts when I do this." "So don't do that!"

[joanmcq]

They were lied to about the roof by the seller. The disclosures required by CA law didn't mention it. She does have a doctors order regarding mold in their primary residence.

[jainen]

>>They were lied to about the roof by the seller<<

She was buying it as-is, so why not get an inspection to tell her how it was?

It was not that she became ill or because the property deteriorated. All that was true before she acquired the property, and she should have known by exercising ordinary prudence. Anyway, fixing damage from a leaky roof is a common thing anybody has to do unrelated to medical condition. I'm not feeling sympathetic today. I think she just wants a tax subsidy to remodel her new vacation home.

[kcjenkins]

Sorry Joan. I understand your natural sympathy for your client. We all hate it when something bad happens to a client, and wish we could help them. BUT, you can't on this one. It was not a casualty, and it is not a medical cost because it improves the value of the home. She's a victim of her own error in not having an inspection done before buying the house. ESPECIALLY given that it was a short sale, which meant she knew she could not expect to go back against the seller if problems were found. Even a cursory inspection of the roof would have found the problem. My guess is that she skipped the obvious step because the price appeared to be a bargain. Hopefully, when the costs are added to her basis, she's still got a nice house with a reasonable basis.

[joanmcq]

Yes, she does have a nice house in Tahoe with a decent basis. And I do feel bad especially since she was still wheezing when she came in, holdover from the exposure.