- 14 -
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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