Lakewood Associates, Robert G. Moore, Tax Matters Partner - Page 11

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            otherwise.  Section 1231(a) governs the characterization of gains                         
            and losses from sales, exchanges, and involuntary conversions of                          
            real and depreciable property used in a trade or business and                             
            permits a taxpayer, in certain circumstances, to characterize                             
            recognized losses incurred from such transactions or occurrences                          
            as an ordinary loss rather than a capital loss subject to the                             
            limitations on deductibility under section 165(f).                                        
                  For purposes of section 165(a), a loss must be evidenced by                         
            a closed and completed transaction and fixed by an identifiable                           
            event.  Sec. 1.165-1(b), Income Tax Regs.  The mere diminution in                         
            value of property is not sufficient to establish a loss for                               
            purposes of section 165(a).  United States v. White Dental                                
            Manufacturing Co., 274 U.S. 398 (1927).  To deduct a decrease in                          
            value of property, there must be some event that fixes the fact                           
            of the loss and the amount thereof.  Petitioner contends that an                          
            involuntary conversion of property is an identifiable event that                          
            gives rise to a section 165 loss deduction.  Petitioner contends                          
            that an involuntary conversion of property occurs when a                                  
            "taxpayer's property, through some outside force or agency beyond                         
            his control, is no longer useful or available to him for his                              
            [purposes]" quoting C.G. Willis, Inc. v. Commissioner, 41 T.C.                            
            468, 476 (1964), affd. 342 F.2d 996 (3d Cir. 1965), which                                 
            involved nonrecognition of gain upon an involuntary conversion                            
            under section 1033.  Petitioner also quotes a similar definition                          

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