Jane B. Oliver and Robert P. Oliver - Page 4

                                         -  -4                                           
          Claimed Casualty Loss Deductions                                            
               A.  Rain and Wind Damage to Home and Personal Property in              
          1988                                                                        
               In February 1988, petitioners contracted for the                       
          construction of an addition to their home.  Because the                     
          contractors informed petitioners that they were not bonded in               
          case of a loss, petitioners contacted their homeowners' insurance           
          agent, Eustis, Dees & Outzen, to make sure that any potential               
          construction-related losses were covered by their existing                  
          homeowners' insurance policy.  Petitioners were told by their               
          insurance agent that any construction-related losses were covered           
          by their existing policy.                                                   
               In preparation for construction to the upper floor of                  
          petitioners' home, a portion of the roof was removed during the             
          day on March 10, 1988, and, at the end of the work day, the open            
          area of the roof was covered with a protective cloth.  In either            
          the late evening of March 10, 1988, or the early morning of March           
          11, 1988, high winds blew off the protective cloth covering the             
          opening in the roof and rain water entered through the opening,             
          flooding the home.  The next day an insurance adjuster from                 
          United States Fidelity & Guaranty Co. (USF&G), for which Eustis,            
          Dees & Outzen was an independent agent, appraised the damage and            
          advised petitioners that their existing homeowners' insurance               
          policy did not cover the loss.  Despite their denial of coverage,           
          USF&G offered petitioners $5,000, as a good-faith gesture, which            
          they refused.                                                               



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