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insurance or otherwise. Sec. 165(a), (c)(3). Taxpayers may
deduct a casualty loss in the year in which the loss is sustained
and may deduct a theft loss in the year in which the loss is
discovered. Sec. 165(a), (c)(3), (e). If in the year of the
occurrence of the casualty, or in the year of the discovery of
the theft, there exists a claim for reimbursement with respect to
which there is a reasonable prospect of recovery, no portion of
the loss is deemed sustained by the taxpayer until the taxable
year in which it can be ascertained with reasonable certainty
whether or not reimbursement will be received. Marine v.
Commissioner, 92 T.C. 958, 980 (1989), affd without published
opinion 921 F.2d 280 (9th Cir. 1991); sec. 1.165-1(d)(2)(i), (3),
Income Tax Regs. Whether a reasonable prospect of recovery
exists is a question of fact. Sec. 1.165-1(d)(2)(i), Income Tax
Regs.
The amount of a casualty or theft loss is equal to the
lesser of (1) the fair market value at the time of the casualty
or theft, or (2) the adjusted cost basis of the property in
question. Secs. 1.165-7(b) and 1.165-8(c), Income Tax Regs.
Therefore, where a taxpayer fails to establish the cost or other
basis of property underlying a claim for a casualty loss
deduction, no deduction is allowable. Zmuda v. Commissioner, 79
T.C. 714, 727 (1982), affd. 731 F.2d 1417 (9th Cir. 1984).
In this instance, petitioner readily admits that A Atlantic
is presently holding his property, and that there is a
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