The concept is not entirely unheard of — we do have the gambling session rules, after all. But is it valid to stretch that concept any further without specific guidance from the IRS?. Well, not specific to the purses and shoes, but surely room to analogize from a few unrelated sources:
TAM 200902011 - A taxpayer may elect to account for its assets subject to § 168 (MACRS) in general asset accounts, as authorized by § 168(i)(4) and the corresponding regulations. Taxpayer asserts that it generally follows these regulations; however, it has never made an election to do so.
Section 1.165-7(b)(2)(i) provides, in part, that a business or investment loss is determined by reference to the single, identifiable property damaged or destroyed. Thus, for example, in determining the fair market value of the property before and after the casualty in a case where damage by casualty has occurred to a building and ornamental or fruit trees used in a trade or business, the decrease in value is measured by taking the building and trees into account separately, and not together as an integral part of the realty, and separate losses are determined for such building and trees. Section 1.165-7(b)(2)(ii) provides a special aggregation rule under which improvements are considered an integral part of real property that is not used for business or investment.
Under the § 165 regulations, a casualty loss is determined by reference to the "single, identifiable property damaged or destroyed." The language of the regulation itself supports a relatively narrow construction of the term:
Therein, the term ‘property’ is clearly adjectivally defined and limited by the phrases ‘single identifiable’ and ‘damaged or destroyed’. . . . These descriptives or modifiers unmistakably constrict the permissible interpretation of ‘property,’ rather than broaden it.
Weyerhaeuser Co. v. United States , 32 Fed. Cl. 80, 100 (1994), aff’d in part and rev’d in part , 92 F.3d 1148 (Fed. Cir. 1996). An example in the regulations provides that where damage by casualty has occurred to an office building, land, and ornamental plantings, the decrease in value and the basis limitation are both measured by taking the building, land, and plantings into account separately, with separate losses being determined for each. § 1.165-7(b)(3), Ex. (2). 6
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6 By contrast, taxpayers who sustain a loss to personal-use real property, such as a home, may aggregate land, buildings, and plantings in determining their loss. § 1.165-7(b)(3), Ex. (3).
Summarizing, the determination of the "single, identifiable property" involves the application of a number of factors, none of which is dispositive, to arrive at a reasonable unit of property taking into account the nature of the casualty and the facts and circumstances of the particular case.
Section 1231. The essence of the tax treatment starts with netting gains and losses.