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As discussed above, petitioner sustained losses of $115,000 to
the structure of her home and $35,000 to her personal property.
This exceeds her insurance recovery by $108,000.
6. Year of Loss
a. Reasonable Prospect of Recovery
Petitioner may deduct her casualty loss only to the extent
it is not compensated by “insurance or otherwise”, e.g., by the
Homeowners' Association. Sec. 165(a). Respondent argues that
petitioner did not have an uncompensated loss because the
prospects of repair by the Homeowners’ Association were very high
in 1990 when petitioner filed her amended 1988 return. Whether
there is a reasonable prospect of recovery is decided based on
all the facts known in the taxable year. Coastal Terminals, Inc.
v. Commissioner, 25 T.C. 1053 (1956); sec. 1.165-1(d)(2)(i),
Income Tax Regs.3 Petitioner filed her amended 1988 return
3 Sec. 1.165-1(d)(2)(i), Income Tax Regs., provides:
If a casualty or other event occurs which may
result in a loss and, in the year of such casualty
or event, there exists a claim for reimbursement with
respect to which there is a reasonable prospect of
recovery, no portion of the loss with respect to which
reimbursement may be received is sustained, for
purposes of section 165, until it can be ascertained
with reasonable certainty whether or not such
reimbursement will be received. Whether a reasonable
prospect of recovery exists with respect to a claim for
reimbursement of a loss is a question of fact to be
determined upon an examination of all facts and
circumstances. Whether or not such reimbursement will
be received may be ascertained with reasonable
certainty, for example, by a settlement of the claim,
by an adjudication of the claim, or by abandonment of
(continued...)
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