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(d) Year of deduction.--(1) A loss shall be
allowed as a deduction under section 165(a) only for
the taxable year in which the loss is sustained. For
this purpose, a loss shall be treated as sustained
during the taxable year in which the loss occurs as
evidenced by closed and completed transactions and as
fixed by identifiable events occurring in such taxable
year. * * *
(2)(i) If a casualty or other event
occurs which may result in a loss and, in the
year of such casualty or event, there exists
a claim for reimbursement with respect to
which there is a reasonable prospect of
recovery, no portion of the loss with respect
to which reimbursement may be received is
sustained, for purposes of section 165, until
it can be ascertained with reasonable
certainty whether or not such reimbursement
will be received. Whether a reasonable
prospect of recovery exists with respect to a
claim for reimbursement of a loss is a
question of fact to be determined upon an
examination of all facts and circumstances.
Whether or not such reimbursement will be
received may be ascertained with reasonable
certainty, for example, by a settlement of
the claim, by an adjudication of the claim,
or by an abandonment of the claim. When a
taxpayer claims that the taxable year in
which a loss is sustained is fixed by his
abandonment of the claim for reimbursement,
he must be able to produce objective evidence
of his having abandoned the claim, such as
the execution of a release.
Based on the record, we find that petitioner's loss from his
investment with AWS was not sustained during his 1993 taxable
year. A copy of AWS's income tax return for its taxable year
ended December 31, 1994, shows that AWS was still operating in
1994 and possessed assets sufficient to satisfy petitioner's
claim. Moreover, petitioner clearly had not abandoned his claim
as of December 31, 1993, because he testified that he actively
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