- 13 - calculating gain or loss on its disposition, calculated in accordance with sections 1.1011-1, 1.1016-2, and 1.1016-3, Income Tax Regs., was their adjusted basis in the old warehouse as of the date of the casualty or $40,831.10 Summary A taxpayer cannot deduct a casualty loss under section 165(a) unless his adjusted basis in the converted property exceeds the reimbursement received. United States v. Koshland, 208 F.2d 636, 639 (9th Cir. 1953); LaFavre v. Commissioner, T.C. Memo. 2000-297; Elliston v. Commissioner, T.C. Memo. 1973-4; sec. 1.165-7(b)(3), Examples (1) through (3), Income Tax Regs. Despite this well-established principle, petitioners urge us, in effect, to permit them to deduct as a casualty loss their entire unrecovered investment in both the old and new warehouses. This we cannot do for the reasons discussed herein. We hold that the cost of constructing the new warehouse does not increase the Boyles’ adjusted basis in the old warehouse for purposes of section 165, and, therefore, the Boyles’ adjusted basis in the 10In his opening brief, respondent notes that the revenue agent’s calculation of the allowable casualty loss showed the Boyles’ adjusted basis as $33,408. This figure was calculated (with a $1 discrepancy) by subtracting the 1994 depreciation deduction of $7,424 from $40,831, the Boyles’ adjusted basis in the old warehouse as of the date of the fire. Respondent states that he does not concede that the 1994 depreciation deduction was proper, but he takes the position that the issue is immaterial because the insurance proceeds received exceed both $40,831 and $33,408.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011