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when eight memberships in the beach club became worthless.
Generally, a taxpayer is allowed to deduct any loss
sustained during the taxable year that is not compensated
by insurance or otherwise. Sec. 165(a). The amount of
the deduction is the taxpayer's adjusted basis provided
in section 1011 for determining the loss from the sale or
other disposition of property. Sec. 165(b). In the case
of an individual, the deduction is limited to: (1) Losses
incurred in a trade or business; (2) losses incurred in any
transaction entered into for profit, though not connected
with a trade or business; and (3) casualty losses. Sec.
165(c). Furthermore, if the loss is one that arose from
the sale or exchange of a capital asset, then the deduction
in the case of a taxpayer other than a corporation is
subject to the limitation on capital losses set forth in
section 1211(b). Sec. 165(f). Under that limitation,
the taxpayer is allowed to deduct losses from the sale or
exchange of capital assets only to the extent of gains from
the sale or exchange of capital assets plus $3,000. Sec.
1211(b). If there is excess capital loss, the taxpayer is
permitted to carry over the excess to the succeeding
taxable year. Sec. 1212(b).
As discussed above, the return filed by each
petitioner claims a deduction from gross income in the
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