Dudley Joseph and Myrna Dupuy Callahan - Page 14

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          before the casualty, minus the fair market value of the property            
          immediately after the casualty, not to exceed, however, the                 
          property's adjusted basis.  Helvering v. Owens, 305 U.S. 468, 471           
          (1939); Millsap v. Commissioner, 46 T.C. 751 (1966), affd. 387              
          F.2d 420 (8th Cir. 1968); sec. 1.165-7(b)(1), Income Tax Regs.              
          The determination of these respective values "shall generally be            
          ascertained by competent appraisal," and any such deduction                 
          "shall be limited to the actual loss resulting from damage to the           
          property."  Sec. 1.165-7(a)(2)(i), Income Tax Regs.  The cost of            
          repairs to the property damaged is also acceptable as evidence of           
          the loss of value under certain circumstances.  Sec. 1.165-                 
          7(a)(2)(ii), Income Tax Regs.                                               
               Termite damage generally does not give rise to a deductible            
          casualty loss because it does not occur suddenly, unexpectedly,             
          or from an unusual cause.  United States v. Rogers, 120 F.2d 244            
          (9th Cir. 1941); Dodge v. Commissioner, 25 T.C. 1022, 1026                  
          (1956).  Only in exceptional situations where damages from                  
          termite infestation occurred in a relatively short period of                
          time, ranging, for example, from 3 to 14 months, has a casualty             
          loss been sustained.  Rosenberg v. Commissioner, 198 F.2d 46 (8th           
          Cir. 1952), revg. 16 T.C. 1360 (1951); Kilroe v. Commissioner, 32           
          T.C. 1304 (1959); Buist v. United States, 164 F.Supp. 218 (E.D.             
          S.C. 1958); Shopmaker v. United States, 119 F.Supp. 705 (E.D. Mo.           
          1953); see Dodge v. Commissioner, supra, for a detailed analysis            
          of the cases.                                                               




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