Gerald and Kathleen Chamales - Page 1

          T.C. Memo. 2000-33                                                          

                               UNITED STATES TAX COURT                                

                GERALD CHAMALES AND KATHLEEN CHAMALES, Petitioners v.                 
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 14839-98.             Filed February 3, 2000.               

                    In 1994, Ps contracted to purchase a home located                 
               in the Brentwood Park area of Los Angeles, California,                 
               adjacent to the residence owned by O.J. Simpson.                       
               Shortly thereafter, Nicole Brown Simpson and Ronald                    
               Goldman were murdered, and O.J. Simpson was arrested in                
               connection therewith.  The neighborhood surrounding the                
               Simpson property became inundated with media personnel                 
               and so-called looky-loos (celebrity-enthralled                         
               sightseers), and this unprecedented attention continued                
               for many months.  On their 1994 Federal income tax                     
               return, Ps took the position that these events                         
               constituted a casualty which permanently devalued their                
               property and for which they were entitled to a sec.                    
               165(c)(3), I.R.C., casualty loss deduction.  R                         
               disallowed the deduction and also determined a sec.                    
               6662(a), I.R.C., accuracy-related penalty on account of                

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