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Respondent did not raise these criticisms when Hise testified at
trial and thus did not give Hise a chance to respond to them.
Hise is a licensed general contractor. He prepared a detailed
report on the condition of petitioner’s home. His testimony
appeared to be credible. We accept Hise’s report as a fair
representation of the condition of petitioner’s house before the
earthquake.
Respondent argues that the fact that petitioner lived in
her home after the earthquake but did not repair the foundation
shows that she believed that the building was safe. However,
respondent has not shown or even argued that a house must be
uninhabitable to lose value to the extent that petitioner
contends.
c. Improvements to Petitioner’s Home
A taxpayer must show that the repairs do not improve the
property more than the damage suffered, and that the value of the
property after the repairs does not, as a result of the repairs,
exceed the value of the property immediately before the casualty.
Sec. 1.165-7(a)(2)(ii), Income Tax Regs. Respondent points out
that some of petitioner's expenses were for improvements to her
home. For example, petitioner installed marble tile worth a
couple of hundred dollars more than the tile that was there
previously, and she upgraded some fixtures and door hardware.
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