Ivan A. Jasko and Judith L. Jasko - Page 1

                                   107 T.C. No. 3                                     


                               UNITED STATES TAX COURT                                


                  IVAN A. JASKO AND JUDITH L. JASKO, Petitioners v.                   
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 5553-95.                   Filed August 20, 1996.           


                    Ps' principal residence was destroyed by fire.                    
               They recovered insurance proceeds based on replacement                 
               cost, resulting in a gain.  Ps incurred legal fees in                  
               obtaining recovery of those proceeds and claimed a                     
               deduction for the amount of those fees paid during the                 
               taxable year.  Ps assert that the insurance policy was                 
               held for the production of income so that the deduction                
               is allowable under sec. 212(1), I.R.C.  Held, under the                
               origin of claim doctrine, Ps' residence was the source                 
               of their gain and the legal fees represented capital                   
               expenditures constituting a reduction in their gain and                
          not currently deductible under sec. 212(1), I.R.C.                          


               L. Randolph Harris, for petitioners.                                   
               Allan D. Hill, for respondent.                                         







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