One of our clients purchased a home in North Carolina for investment, and have used it as a second home. Unfortunately, the real estate market has not done well there. They sold the home and have a loss of approximately $70,000. Can they deduct this loss since this was not their personal residence?

This same client sustained a loss from a floor in another condo. The question of how it happened became an issue, and even though my client did not start it, the insurance would not pay for it since the insurance company believed it should have been paid by the condo association. We want to report the loss on the Form 1040. The costs to repair the damage was approximately $45,000. The Form 4868, which we would use for reporting this loss does not ask for the costs to repair the damages. The form indicates the basis prior to the loss and the basis after the loss. Is this the way it has to be reported. With the difference in reporting the value being the amount paid to repair the damage? It would seem there would be another way to report since the repairs were done, and the client has the loss amounts, which consist of the receipts to pay to repair the damages.