Rev. Proc. 2018-8 can be quite misleading. Under the “purpose” the Rev. Proc. leads the reader to believe that the Rev. Proc. provides an alternate and more taxpayer-beneficial way of determining a casualty loss. The following is an exact quote from the Rev. Proc. with the misleading wording italicized.
Purpose: This revenue procedure provides safe harbor methods that individual taxpayers may use in determining the amount of their casualty and theft losses pursuant to IRC Sec 165 of the Internal Revenue Code for their personal-use residential real property (as defined in section 3.02 of this revenue procedure) and personal belongings (as defined in section 3.03 of this revenue procedure).
The italicized description of the Rev. Proc. is essentially misleading, and a large number of tax professionals have been misled by this Rev. Proc. The problem is that the Revenue Procedure’s actual purpose is to provide safe harbors to determine fair market value of property for casualty loss purposes, NOT the casualty loss itself as implied in the “purpose”. A casualty loss is still the lesser of the adjusted cost basis or the fair market value on the date of the casualty reduced by any insurance reimbursement.