Estate of James W. Boyle - Page 8




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          or the date the casualty loss, if any, was deemed sustained.                
          Petitioners urge us to conclude that (i) the Boyles’ adjusted               
          basis in the old warehouse must be calculated as of 1995, the               
          year the casualty loss, if any, was sustained in this case and              
          that (ii) the adjusted basis so calculated must include the cost            
          of rebuilding the warehouse.                                                
              We agree with petitioners that neither section 1.165-1(c)(4)           
          nor section 1.165-7(b)(1), Income Tax Regs., clearly states that            
          a taxpayer’s adjusted basis in property damaged or destroyed by             
          casualty must be calculated as of the date of the casualty.  The            
          pertinent part of section 1.165-1(c)(4), Income Tax Regs.,                  
          provides simply that, in determining the amount of loss actually            
          sustained under section 165(a), proper adjustment must be made              
          for any insurance received.  The pertinent part of section 1.165-           
          7(b)(1), Income Tax Regs., provides that the amount of the                  
          casualty loss to be taken into account under section 165(a) is              
          the lesser of either (i) the amount equal to the fair market                
          value of the property immediately before the casualty reduced by            
          the fair market value immediately after the casualty or (ii) the            
          amount of the adjusted basis prescribed in section 1.1011-1,                
          Income Tax Regs., for determining the loss from the sale or other           
          disposition of the property involved.7                                      

               7Sec. 1.1011-1, Income Tax Regs., provides that a taxpayer’s           
          basis in property shall be its cost, adjusted to the extent                 
                                                             (continued...)           





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