-10-
In sustaining respondent's determination regarding the casualty
loss, this case turned on the somewhat technical concept that the
road constituted a separate, identifiable piece of property,
rather than a part of the real property that surrounds it, for
purposes of section 1.165-7(b)(2)(i), Income Tax Regs. Although
we have not ruled in favor of petitioners on this issue, their
failure to comply with the regulations was due to their
reasonable belief that their cost could be allocated to the
damage to the road. Consequently, petitioners are not liable for
an accuracy-related penalty with respect to the claimed casualty
loss.
To reflect the foregoing,
Decision will be entered
under Rule 155.
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Last modified: May 25, 2011