109 T.C. No. 21
UNITED STATES TAX COURT
LAKEWOOD ASSOCIATES, ROBERT G. MOORE, TAX MATTERS PARTNER,
Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 24656-93. Filed December 29, 1997.
L, a partnership, purchased land on which it
intended to build single-family residences. At the
time of purchase, the land was zoned for agricultural
use and one-third of the land was wetlands under
Federal wetland regulations. In 1988, L applied for
rezoning of the land to residential, and in 1989, L's
rezoning application was denied. Also in 1989, new
Federal wetland regulations were issued that resulted
in about 75 percent of the land’s being classified as
wetlands. L is required to obtain a permit under the
Clean Water Act of 1977, Pub. L. 95-217, sec. 67(a)
(commonly called a section 404 permit), 91 Stat. 1566,
1600, 33 U.S.C. sec. 1344 (1994), before beginning the
residential project on the wetland portion of the land.
L did not apply for a permit in 1989, and L did not
sell or abandon the property. The land remains zoned
for agricultural use. L claimed a loss deduction under
sec. 165, I.R.C., in 1989 for the decrease in property
value of the land based on its inability to use the
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