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situations such as the one presently before us is relatively
simple and straightforward. Applying those principles to
hundreds of personal household items that would typically be
damaged or destroyed in a residential fire is more problematic,
not only because of the number of items involved, but also
because of the nature of those items.
Establishing the fair market values of used household items
is not only difficult, but also not enough for purposes of
section 165(a). The taxpayer’s cost, or basis, in each item of
property must also be established, often long after the item was
acquired. Furthermore, the utility, economic, and sentimental
values of a particular piece of personal property to a particular
owner are not necessarily reflected in either the fair market
value of, or the taxpayer’s basis in, that item. Consequently,
it is not unusual for a taxpayer who suffers the loss of property
due to some casualty to sense a loss greater than that allowable
as a deduction pursuant to section 165(a).
Petitioners could not explain the manner in which the
casualty loss deduction is computed on their return, and we
cannot find any support for the computation in the record. The
amount of insurance reimbursement listed is obviously incorrect,
at least in the aggregate, and does not correspond to the
recovery of any of the component amounts. Furthermore, the
amounts listed for “cost or basis” and “fair market value before
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