- -7
On their joint Federal income tax return for the taxable
year 1988, petitioners claimed a casualty loss deduction of
$142,729 relating to the claimed storm damage, consisting of
damage to their home in the amount of $34,998.34, damage to its
contents of $107,330.60, and cleanup costs of $400.
Respondent sent petitioners a notice of deficiency for 1988
disallowing the claimed $142,729 casualty loss deduction because
a schedule attached by petitioners to that return showed that
they had been reimbursed by their insurance company for the full
amount of the casualty loss. Petitioners paid the deficiency in
income tax determined by respondent for 1988.
Respondent and petitioners agree that, pursuant to section
1.165-1(d)(2)(i), Income Tax Regs., the casualty loss deduction
in the amount of $142,729, before insurance reimbursement,
claimed by petitioners on their 1988 return is properly before
the Court for the taxable year 1991. The amount of reimbursement
received by petitioners for the casualty loss which occurred in
1988 could not be ascertained until the civil litigation between
petitioners and FGIU was settled in 1991.
At trial, petitioners claimed for the first time that the
amount of loss relating to the claimed storm damage in 1988 was
$193,462.16, before insurance reimbursement.
On their Federal income tax return for the taxable year
1991, petitioners reported $32,040 received by them in settlement
of the USF&G litigation as "other income". In the notice of
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