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the personal casualty gains for that taxable year plus so much of
the excess as exceeds 10 percent of adjusted gross income for
that taxable year. Thus, where there are no personal casualty
gains for a taxable year, personal casualty losses (in excess of
$100 per casualty) are allowable to the extent that they exceed
10 percent of adjusted gross income for that taxable year.
The method of valuation to be used in determining a casualty
loss is prescribed in section 1.165-7(a)(2), Income Tax Regs.,
which provides as follows:
(i) In determining the amount of loss deductible under
* * * [section 165], the fair market value of the
property immediately before and immediately after the
casualty shall generally be ascertained by competent
appraisal. This appraisal must recognize the effects
of any general market decline affecting undamaged as
well as damaged property which may occur simultaneously
with the casualty, in order that any deduction under
* * * [section 165] shall be limited to the actual loss
resulting from damage to the property.
(ii) The cost of repairs to the property damaged is
acceptable as evidence of the loss of value if the
taxpayer shows that (a) the repairs are necessary to
restore the property to its condition immediately
before the casualty, (b) the amount spent for such
repairs is not excessive, (c) the repairs do not care
for more than the damage suffered, and (d) the value of
the property after the repairs does not as a result of
the repairs exceed the value of the property
immediately before the casualty.
The amount deductible is governed by section 1.165-7(b)(1),
Income Tax Regs., which provides that the amount of the loss to
be taken into account for purposes of section 165(a) shall be the
lesser of: (1) The amount which is equal to the fair market
value of the property immediately before the casualty reduced by
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