- 6 -
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.
Page: Previous 1 2 3 4 5 6 7 Next
Last modified: May 25, 2011