-4-
On May 26, 1993, petitioners filed an application with the
U.S. Small Business Administration (SBA) for disaster relief. On
June 3, 1993, in conjunction with petitioners' SBA loan
application, an agent from the SBA visited petitioners' property
for the purpose of evaluating the damage from the storms and
preparing a written appraisal of the damage. The SBA report
describes the damage to the property as a “washed out surface
roadway.” The SBA report estimates repair cost to the road at
$208,000.
On their 1992 Federal income tax return, petitioners claimed
a casualty loss of $220,000. Petitioners’ return was prepared by
their accountant. This amount is equivalent to petitioners’
total adjusted basis in properties A and B, exclusive of the
$6,844 attributable to the cost of the road extension constructed
in 1984. The claimed casualty loss derived from damages to the
road from the storms. In the notice of deficiency, respondent
disallowed the casualty loss.
OPINION
At issue is the proper computation of petitioners’ 1992
casualty loss deduction.3 Petitioners claimed a $220,000
casualty loss because of purported damages to their road from
3 Although the loss at issue occurred in 1993, sec.
165(i)(1) permits any loss attributable to a casualty in an area
subsequently declared a Federal disaster area, at the election of
the taxpayer, to be taken into account for the taxable year
immediately preceding the taxable year in which the disaster
occurred.
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