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For the year 1991, petitioners did not claim a casualty loss
on their return; however, in their petition they alleged
entitlement to a casualty loss deduction of $19,000, subject to
limitations. On brief, petitioners claimed this item to be
$16,580.50 as allowed by the District Court. The record contains
assertions by petitioners that the District Court award was
discharged in bankruptcy by Mr. Hewitt; however, no evidence was
presented to show any such bankruptcy discharge of this debt or
the timing thereof. Moreover, no evidence was presented to show
whether the proceeds from the foreclosure sale satisfied this
claim that primed the Federal tax lien.
Section 165(a) provides that there shall be allowed as a
deduction any loss sustained during the taxable year and not
compensated for by insurance or otherwise. In particular,
section 165(c)(3) allows a deduction to an individual for loss of
property not connected with a trade or business or a transaction
entered into for profit, if such loss arises from fire, storm,
shipwreck, or other casualty, or from theft. Personal casualty
or theft losses are deductible only to the extent that the loss
exceeds $100 and 10 percent of adjusted gross income. See sec.
165(h)(1) and (2). Such losses, moreover, are deductible as
itemized deductions on Schedule A of the taxpayer's return. In
this case, petitioners do not contend that the subject property
was ever used in a trade or business or a transaction entered
into for profit.
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