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Chinese Drywall Causing Problems in 400 Florida Homes, Lennar Says

Jul 13, 2009 | Parker Waichman LLP

Lennar Homes says 400 of its Florida homes have problems with Chinese drywall.  According to a report in The Wall Street Journal, the Miami-based builder said on Friday that it hasn't found any defective  Chinese drywall in homes it built outside of the state, and said it can't "reasonably estimate its future exposure" to the problem.

As we’ve been reporting for months now, homeowners living with Chinese drywall have reported that it fills homes with a putrid, “rotten-eggs” odor and cause metals to corrode. Some have complained of sinus and respiratory problems that occur while they are in their homes. Many families have had to leave their homes, and in most instances, buildings must be gutted and the drywall replaced to fix the problem.

According to tests conducted by the Environmental Protection Agency (EPA), ) Chinese drywall samples were found to contain sulfur and two organic compounds associated with acrylic paint in that were not present in the American wallboard. Recently, new concerns were raised that some Chinese drywall could also be radioactive. According to an LA Times investigation, some Chinese drywall manufacturers use phosphogypsum - a radioactive phosphorous substance - to make wallboard. At least four firms told the Times that drywall made with phosphogypsum was shipped to the U.S. in 2006.

Recently, the Consumer Products Safety Commission (CPSC) reported that it had received more than 600 complaints related to the drywall issue from 21 states and the District of Columbia.

According to The Wall Street Journal, the figures reported by Lennar were as of May 31.   The builder said it has set aside $39.8 million to repair the homes. It also has $20.7 million receivable for covered damages under its insurance policies, the Journal said.

Meanwhile, it appears that there could soon be some tax help available for victims of defective Chinese drywall. is reporting that the Internal Revenue Service (IRS) says that victims of Chinese drywall might qualify for a casualty loss on their taxes because of the corrosion of pipes, air-conditioning and electrical appliances caused by gases released by the Chinese drywall.  

According to a letter from the IRS's associate chief counsel to three U.S. Senators, Section 165 of the IRS Code allows a casualty loss - a loss suffered from an unexpected event like a fire - deduction in some circumstances.  "The amount of their casualty loss is the difference between the fair market value of their home immediately before and immediately after the casualty, limited to the adjusted basis of their home,"  the letter said.

Under the rule, however, affected homeowners would not be able to deduct costs such as paying for another home or apartment, said.

Sen. Bill Nelson (D-Florida) told that families affected by the Chinese drywall might now be able to take a deduction worth tens of thousands of dollars.  

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