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before the fire.1 Respondent argues that petitioners’ casualty
loss deduction should be computed as follows:
Fair market value of personal property
before fire $51,711.17
Less amount reimbursed 45,732.06
Less $100 (sec. 165(h)(1)) 100.00
Less 10 percent of adjusted gross income
(sec. 165(h)(2)) 4,280.00
Allowable casualty loss deduction 1,599.11
In effect, in the above computation, respondent considers the
property damaged or destroyed in the fire to have had no fair
market value after the fire. Furthermore, to petitioners’
benefit, respondent treats the property’s fair market value prior
to the fire and petitioner’s basis in the property as equal,
which is highly unlikely.
We consider respondent’s computation to be reasonable under
the circumstances, and note that, if only by coincidence, it
provides support for the adjustment made in the notice of
deficiency. The computation, however, does not take into account
the value of those items removed from the Hendersonville
residence by the cleaning company, determined to be
unsalvageable, and never returned to petitioners. We accept
petitioners’ $4,562 estimate of value of those items, adopt
respondent’s approach as to the significance of that estimate,
1 Subtracting depreciation from replacement cost can be an
acceptable method of determining the fair market value of an item
of personal property. See Cornelius v. Commissioner, 56 T.C. 976
(1971).
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