I just want to verify that I have a correct understanding of the IRS position that casualty loss deductions are only the basis of the property lost, not its fair market value.
For example, lets say an old couple has a house for which they paid $20,000 in 1975. The house burns down in 2018 and at that time it has a fair market value of $650,000. The couple can only deduct the $20,000 they paid for the house originally. Is that right? Seems kind of crazy.