Tommy Lee Randle and Joyce Faye Randle - Page 8

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          relatives for financial assistance.  The following Spring, in               
          April or May, repairs to their residence began, which repairs               
          were completed in August or September 1996.                                 
               Petitioners filed a U.S. Individual Income Tax Return, Form            
          1040, for 1996.  Petitioners attached to their return Schedule A,           
          Itemized Deductions, and claimed thereon a casualty loss in the             
          amount of $7,194.  In support of this loss, petitioners also                
          attached to their return Form 4684, Casualties and Thefts.  The             
          form suggests that petitioners used the cost of repairs as the              
          measure of their loss.                                                      
               As a general rule, section 165(a) allows as a deduction any            
          loss sustained during the taxable year and not compensated for by           
          insurance or otherwise.  In the case of an individual, section              
          165(c) limits the deduction to:  (1) Losses incurred in a trade             
          or business; (2) losses incurred in any transaction entered into            
          for profit, even though not connected with a trade or business;             
          and (3) losses of property not connected with a trade or business           
          or with a transaction entered into for profit, if such losses               
          arise from fire, storm, shipwreck, or other casualty, or from               
          Issue (1): Year in Which the Loss Was Sustained                             
               Respondent properly concedes that the loss incurred by                 
          petitioners from the Northridge earthquake arose from a casualty            

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