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the termite infestation. Respondent disallowed petitioners'
claimed casualty losses on the grounds that the cost of repairing
termite damage is not a casualty loss and for lack of
substantiation.
Section 165(a) allows a deduction for losses sustained
during the taxable year and not compensated for by insurance or
otherwise. In the case of individuals, deductible losses are
limited to losses incurred in a trade or business or a
transaction entered into for profit, and losses resulting from
"fire, storm, shipwreck, or other casualty, or from theft." Sec.
165(c). An "other casualty" has been defined by the courts to
mean a loss proximately caused by a sudden, unexpected, or
unusual event, excluding progressive deterioration. Maher v.
Commissioner, 680 F.2d 91, 92 (11th Cir. 1982), affg. 76 T.C. 593
(1981); Fay v. Helvering, 120 F.2d 253 (2d Cir. 1941), affg. 42
B.T.A. 206 (1940); White v. Commissioner, 48 T.C. 430, 435
(1967). Casualty losses for individuals are deductible only to
the extent that the loss exceeds $100 per casualty and 10 percent
of adjusted gross income (AGI). Sec. 165(h).
An individual's casualty loss is "treated as sustained
during the taxable year in which the loss occurs as evidenced by
closed and completed transactions and as fixed by identifiable
events occurring in such taxable year." Sec. 1.165-1(d)(1),
Income Tax Regs. The amount of a casualty loss is generally
computed as the fair market value of the property immediately
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