James Lewis and Lilian E. Hunter - Page 6

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          existence of the event that caused the casualty loss; (2) the               
          loss occurred in 1996; (3) the fair market value of petitioners’            
          residence before and after the alleged casualty; and (4) the                
          adjusted basis of their residence.                                          
               Petitioners acknowledge that they did not sustain the                  
          casualty in 1996.  Mr. Hunter testified that they originally                
          discovered the foundation damage in 1995 but believed the damage            
          resulted from an earthquake occurring in 1994.  Mr. Hunter stated           
          that, on the advice of their tax preparer,8 they decided to take            
          half of the casualty loss in the 1995 tax year and the remainder            
          in the 1996 tax year.                                                       
               A casualty loss from a single event generally cannot be                
          deducted piecemeal.  See Katz v. Commissioner, supra.  The losses           
          must be deducted either in the year the casualty was sustained or           
          in the year when the full extent of the loss is known.  See id.             
          We therefore find that because petitioners knew in 1995 the full            
          extent of the damage to their residence, they were not entitled             
          to deduct part of the alleged casualty loss in 1996.9                       

               8   Petitioners used a professional tax preparation service            
          to electronically prepare and file their 1995 and 1996 returns.             
               9  If the casualty occurred in 1994, the loss generally can            
          only be deducted during that year or the year in which the full             
          extent of the loss is known.  If such year is not properly before           
          the Court, then we are barred from addressing the merits of the             
          casualty loss deduction.  See sec. 6214(b); Katz v. Commissioner,           
          T.C. Memo. 1983-8.                                                          

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