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made any capital expenditure in connection with the Foxbriar
swimming pool prior to 1994.
Petitioners rely on Rev. Rul. 73-41, 1973-1 C.B. 74, for the
proposition that casualty loss deductions can be allowed to mere
lessees. Petitioners’ reliance on this revenue ruling is
misplaced. The taxpayer in the cited revenue ruling was a lessee
of residential property who, under the terms of the lease, was
required to surrender the property in good condition at the
termination of the lease. A fire severely damaged much of the
property just prior to the lease expiration, and the taxpayer
failed to surrender the property in good condition. The taxpayer
denied liability for the damage, and the lessor sued. A judgment
was rendered against the taxpayer. The ruling held that the
"loss sustained upon payment of the judgment was directly
attributable to the fire", and, thus, the taxpayer was entitled
to a casualty loss deduction with respect thereto.
Petitioners in the instant case were not required, under
their contract with the Hewitts, to repair the damage to the
swimming pool and had no judgment rendered against them with
respect to the swimming pool damage, an element which appears to
have been essential in the revenue ruling. Moreover, it is well
established that "the authoritative sources of Federal tax law
are in the statutes, regulations, and judicial decisions and not
in * * * informal [IRS] publications." Zimmerman v.
Commissioner, 71 T.C. 367, 371 (1978), affd. without published
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