The deduction of property totally destroyed is the adjusted basis less salvage value and insurance or other compensation. The deduction in cases of partial destruction is limited to the lesser of the adjusted basis or the decrease in fair market value of the property just before and just after the casualty reduced by insurance or other compensation received. The deduction loss for timber theft is determined in the same manner as casualty loss. Theft losses are also referred to as timber trespass and are limited to the property's adjusted basis. Therefore, the quantity of timber used to determine the depletion unit is the quantity just prior to the time the theft was discovered.
Losses are generally deductible in the year of discovery.
Losses are reported on Form 4684. To take a deduction for a casualty or theft loss you must be able to show that there was actually a casualty or theft, and you must be able to support the amount you take as a deduction. The loss was a direct result of the casualty. That you are the owner of the property, or if you lease the property from someone else that you are contractually liable to the owner for the damages. That your property was stolen.