A recent federal appeals court decision on the subject of income tax law stands to be of great benefit to cooperative corporations around the city, particularly in light of damage suffered in many buildings from Hurricane Sandy. Alphonso v. Commissioner of Internal Revenue, 708 F.3d 344 (2d Cir. 2013).
Alphonso involved the Castle Village apartment complex, which includes 589 apartments in five twelve-to-fifteen-story buildings situated on approximately seven acres in Manhattan on the eastern bank of the Hudson River overlooking Riverside Drive and the Henry Hudson Parkway. The grounds are a landscaped private park, featuring benches, garden paths and a children’s playground among other amenities.
On May 12, 2005, a retaining wall structure, approximately 70 feet high and 250 wide, which held the grounds in place over Riverside Drive and the parkway, suddenly collapsed, spilling soil and rock over all lanes of the Henry Hudson Parkway, causing significant damage. The collapse blocked the parkway, attracting considerable attention in the media.
Exercising its contractual rights, Castle Village assessed all of its tenant-shareholders the cost, beyond insurance coverage, of repair and clean-up.
On their personal income tax returns, the tenant-shareholders took “casualty losses” for the amounts they contributed. A casualty loss is a tax deduction that individual taxpayers are permitted for non-business “losses of property … if such losses arise from fire, storm, shipwreck, or other casualty, or from theft.”