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have not shown that they became worthless during 1992.
Are Petitioners Entitled to a Casualty Loss Deduction?
We next consider whether petitioners are entitled to a
casualty loss deduction under section 165 for losses stemming
from the destruction of the auction. Petitioners advanced their
casualty loss argument for the first time in their brief as an
entirely new and separate issue. After considering that this
issue was not tried by consent of the parties and that surprise
and prejudice to respondent would result, we hold that the issue
was not timely raised. See Estate of Horvath v. Commissioner, 59
T.C. 551, 555 (1973). Petitioners’ casualty loss argument
appears to be an afterthought. Petitioners have not shown that
they had an ownership interest in the auction. Additionally,
petitioners’ argument conflicts factually with petitioner’s
father’s and stepmother’s claim of a $55,825 casualty loss for
the same property.
Petitioner’s Basis in Glenwood
We next consider whether petitioners have shown that they
correctly reported capital gain from the 1992 sale of Glenwood.
Section 1001(a) provides that gain from the sale or disposition
of property shall be the excess of the amount realized over the
adjusted basis. Section 1001(b) provides that the amount
realized is the sum of money received plus the fair market value
of any property received. Section 1001(c) requires that the
amount of gain on the sale or exchange of property be recognized
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