Drink, drive, crack up the car...and write off the damage on your tax return.

12/16/09 - For one taxpayer, that scenario became reality after he appealed a decision by the Internal Revenue Service.

The U.S. Tax Court allowed the driver of a car to write off thousands of dollars of damage after he totalled it while under the influence.

While it's not unusual to deduct property damage (this is claimed as a casualty loss deduction on Form 4684), the circumstances of the case--which required a judge to decide if the driver was or wasn't willfully negligent--set it apart.

The case also points up a tax code gap. While it turns on the idea of willful negligence, tax rules do not define what that means for casualty losses.

In 2005, the taxpayer, Justin M. Rohrs, had bought a 2006 Ford F-350 pickup truck for $40,210. Months later, he went to a gathering at a friend's house. Expecting he would be drinking, he arranged for a ride to and from home. But after he got home he decided to drive to his parents' house. En route, his truck slid off an embankment and rolled over. Rohrs was arrested for driving under the influence and was taken to the hospital.

His insurance company turned down a loss claim because of his arrest and DUI citation. Then the IRS turned down his claim for a $33,629 casualty loss deduction on his Form 1040. Rohrs took his case to Tax Court.

Driving after drinking doesn't amount to willful negligence in itself, the judge said. Instead, he wrote, the level of intoxication and the quality of the driving has to be taken into consideration. In the case of Rohrs, his blood-alcohol level was at 0.09%, just slightly over California's legal limit of 0.08%.