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(2) that the “Insurance or other reimbursement” with respect to
that automobile was $27,000, (3) that they had no gain from a
casualty or theft, (4) that the fair market value before the
casualty or theft of Mr. Mitic’s Mercedes was $55,000, (5) that
the fair market value of that automobile after the casualty or
theft was zero, and (6) that the amount of the casualty loss with
respect to Mr. Mitic’s Mercedes was $40,500. The amount of
$27,000 that petitioners indicated in Form 4684 was the “Insur-
ance or other reimbursement” with respect to that vehicle repre-
sented petitioners’ estimate of the amount to be paid by State
Farm in settlement of the automobile damage claim.
In the 1994 joint return, petitioners claimed a depreciation
deduction for the entire year with respect to the Geo that they
had purchased from their son in December 1994. Petitioners also
claimed in the 1994 joint return depreciation deductions with
respect to the Toyota and another automobile.
Notice of Deficiency
In the notice of deficiency (notice) issued to petitioners
for the years at issue, respondent, inter alia, disallowed:
(1) For 1993 the entire medical expense deduction, except for
$3,889 for physicians and medicines, that petitioners claimed in
the 1993 joint return (petitioners’ claimed medical expense
deduction at issue) and (2) for 1994 (a) the casualty loss
deduction with respect to Mr. Mitic’s Mercedes and (b) the
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