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separately, and not together as an integral
part of the realty, and separate losses shall
be determined for such building and trees.
From the text of section 165 and the regulations thereunder,
we discern that Trinity may deduct a casualty loss for the
taxable year in which it suffers a "casualty" resulting in a loss
from the damage or destruction of property. We also discern that
the amount of the loss equals the diminution in value2 of each
single, identifiable piece of property, as measured before and
after the casualty, and that this loss is deductible to the
extent that it is not greater than the property's adjusted basis.
To the extent that this loss is greater than the property's
adjusted basis, the deductible loss is limited to the property's
adjusted basis. See also Helvering v. Owens, 305 U.S. 468
(1939); Carloate Indus., Inc. v. United States, 354 F.2d 814, 817
(5th Cir. 1966); Lamphere v. Commissioner, 70 T.C. 391, 395
(1978); Millsap v. Commissioner, 46 T.C. 751, 759 (1966), affd.
387 F.2d 420 (8th Cir. 1968).
Respondent, citing Lamphere v. Commissioner, supra at 395,
observes that damage caused by a flood may be a casualty under
section 165, and we find under the facts herein that the subject
2 We use the term "value" throughout this opinion as a
shorthand for the term "fair market value". For a discussion of
the rules used to determine "fair market value" for Federal
income tax purposes, see Estate of Scanlan v. Commissioner, T.C.
Memo. 1996-331, affd. without published opinion 116 F.3d 1476
(5th Cir. 1997), and Estate of Proios v. Commissioner, T.C. Memo.
1994-442.
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