What does the term "casualty" refer to in tax terminology?

In tax terminology, the term "casualty" specifically refers to the loss or damage to property resulting from an unexpected event, such as a natural disaster (flood, hurricane), theft, or vandalism. This definition is crucial for understanding how casualty losses can be deducted on tax returns.

When individuals experience a casualty loss, they may be eligible to claim a deduction, provided the loss exceeds certain thresholds and is documented adequately. This is relevant for taxpayers who have suffered financial loss due to circumstances beyond their control, allowing them to potentially recover some of the losses through tax benefits.

The other options pertain to different concepts: the loss of life relates to personal injury or wrongful death claims, insurance payouts deal with financial compensation received from insurers, and depreciation covers the decrease in value of assets over time due to wear and tear. Each of these options represents important aspects of taxation and accounting but does not accurately capture the essence of "casualty" as it is used in the context of tax law.