Precision Pine & Timber, Inc. - Page 9
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amortizable asset due to any of a variety of factors including
"legislative or regulatory action." The regulation is
controlling only when assets become obsolete over a period of
time greater than 1 year. Id. Assuming that petitioner's
noncompetition agreements became obsolete as a result of a
"sudden" event, the 1995 prohibitory injunction, the Court must
look elsewhere for guidance.
When an amortizable asset becomes obsolete within 1 taxable
year, a taxpayer may be entitled to a loss deduction. Keller
Street Dev. Co. v. Commissioner, 323 F.2d 166, 171 (9th Cir.
1963), affg. in part, and revg. in part 37 T.C. 559 (1961); Moise
v. Burnet, 52 F.2d 1071 (9th Cir. 1931); Coors Porcelain Co. v.
Commissioner, supra at 692. The appropriate statutory provision
for the allowance of a loss deduction for extraordinary
obsolescence of a depreciable asset occurring within 1 year is
section 165(a). See sec. 1.165-1, Income Tax Regs. Generally,
section 1.167(a)-8, Income Tax Regs., provides the rules
governing the recognition, amount, and basis for gain or loss
resulting from the sudden termination of the usefulness of
depreciable assets. Coors Porcelain Co. v. Commissioner, supra
at 692; secs. 1.165-2(c) and 1.167(a)-8(a), -9, Income Tax Regs.
Section 165(a) allows a deduction for any loss sustained
during the taxable year and not compensated for by insurance or
otherwise. To be allowable as a deduction under section 165(a),
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