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The question of whether the operating authorities became
worthless during a given taxable year is a question of fact. See
Boehm v. Commissioner, supra at 293. The general requirement
that losses be deducted in the year in which they are sustained
calls for a practical, not a legal, test. See Lucas v. American
Code Co., 280 U.S. 445, 449 (1930). In Echols v. Commissioner,
950 F.2d 209, 213 (5th Cir. 1991), the Court of Appeals for the
Fifth Circuit stated:
the test for worthlessness is a combination of
subjective and objective indicia: a subjective
determination by the taxpayer of the fact and the year
of worthlessness to him, and the existence of objective
factors reflecting completed transaction(s) and
identifiable event(s) in the year in question--not
limited, however, to transactions and events that rise
to the level of divestiture of title or legal
abandonment.
See also Norwest Corp. & Subs. v. Commissioner, 111 T.C. 105, 140
(1998) (citing Echols v. Commissioner, supra, and finding
insufficient objective evidence of worthlessness of the property
at issue); Middleton v. Commissioner, 77 T.C. 310, 322 (1981)
(there is no requirement that a taxpayer relinquish title in
order to establish a loss if such loss is reasonably certain in
fact and ascertainable in amount), affd. per curiam 693 F.2d 124
(11th Cir. 1982).
Respondent argues that petitioner did not make a subjective
determination that its operating authorities had become worthless
during 1994, that no objective factors reflect completed
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