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destruction of petitioners' residence as a disposition finds
support in the involuntary conversion provisions of section 1033,
which treat casualties in the same manner as condemnations, and
in the provisions dealing with the limitation of the deduction
for casualty losses under section 165(h), which specify that
personal casualty gains in excess of losses shall be treated as
gains from the sale of the property.
We also note that no part of the gain from such disposition
of petitioners' residence appears on their 1992 return and indeed
may never be includable in income if petitioners take advantage
of the replacement provisions of section 1033, e.g., if
petitioners die before disposing of the replacement home. See
supra note 1. This being the case, the disallowance of the
deduction of the legal fees herein is comparable to the situation
involved in Towanda Textiles, Inc. v. United States, 149 Ct. Cl.
123, 180 F. Supp. 373 (1960), where legal expenses of collecting
insurance proceeds on a building, destroyed by fire during a
section 337 liquidation, were denied.
Petitioners rely heavily on Ticket Office Equipment Co. v.
Commissioner, 20 T.C. 272 (1953), affd. per curiam 213 F.2d 318
(2d Cir. 1954). In that case, the taxpayer was allowed to deduct
legal and adjusters' fees expended to collect insurance when the
taxpayer's building was partially destroyed by fire. The
building was used in the taxpayer's business, and the Court
observed that the expenditures arose in the ordinary course of
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