Ivan A. Jasko and Judith L. Jasko - Page 5

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          Petitioners concede that their residence was not held for the               
          production of income but contend that the insurance policy should           
          be separated from the ownership of the residence and that, in               
          this context, their expenses to recover full replacement cost of            
          their residence fall within the purview of section 212(1).                  
               The initial element in determining deductibility is the                
          application of the "origin of the claim" doctrine articulated by            
          the Supreme Court in United States v. Gilmore, 372 U.S. 39                  
          (1963), and applied in Woodward v. Commissioner, 397 U.S. 572               
          (1970), and United States v. Hilton Hotels Corp., 397 U.S. 580              
          (1970).                                                                     
               We are not prepared to accept petitioners' argument that we            
          separate the insurance policy and the dispute thereunder from               
          petitioners' ownership of the residence, which was concededly a             
          capital asset not held for the production of income.  The policy            
          was designed to reimburse petitioners against economic loss                 
          arising from the occurrence of defined contingencies, represented           
          by the amount necessary to replace the residence.  See, e.g.,               
          Allied Fidelity Corp. v. Commissioner, 66 T.C. 1068, 1074 (1976),           
          affd. 572 F.2d 1190 (7th Cir. 1978).  But for the residence and             
          the fire, the insurance policy would be meaningless.  Under such            
          circumstances, the residence is the origin of the situation that            
          caused petitioners to incur the legal fees.  Compare Wagner v.              
          Commissioner, 78 T.C. 910 (1982), where we refused to separate a            
          lawsuit seeking adjustment of the purchase price of stock from              




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