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Manual. Lakewood's tax matters partner Robert G. Moore who owned
the Boy Scout Tract adjacent to the Elbow Lake property also
claimed a section 165 loss deduction in 1989 with regard to the
Boy Scout Tract due to the issuance of 1989 Manual.
OPINION
The issue for our consideration is whether Lakewood is
entitled to a loss deduction in 1989 because of the issuance of
the 1989 Wetlands Manual and MOA. Petitioner argues that
Lakewood is entitled to a deduction in the amount of the decrease
in value of the Elbow Lake property as a result of being
prevented from developing the property for residential use under
the Federal wetland regulations. Petitioner contends that
Lakewood's inability to use its property for the purpose Lakewood
intended when it purchased the property constitutes an
involuntary conversion of property. Accordingly, petitioner
contends that Lakewood is entitled to a loss deduction under
section 165. On its 1989 tax return, Lakewood characterized the
loss as a governmental taking of property upon the issuance of
the 1989 Manual and the execution of the MOA. On brief, however,
petitioner contends that a constitutional taking of the property
is not required in this case to establish a deductible loss under
section 165.
Section 165(a) permits a deduction for any loss sustained
during the taxable year and not compensated for by insurance or
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