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within the meaning of section 165(c)(3). However, respondent
contends that such loss was not “sustained” by petitioners in
1996 but rather in 1994 or, at the latest, in 1995. In contrast,
petitioners contend that they sustained the loss in 1996 because
that was the year in which they “paid for the damage” by having
their home repaired. We agree with respondent.
A casualty loss, like any loss that is deductible under
section 165, is allowable only for the year in which the loss is
“sustained”. Sec. 1.165-1(d)(1), Income Tax Regs. A loss is
sustained during the year in which the loss occurs as evidenced
by closed and completed transactions and fixed by identifiable
events. Id.; see Ramsay Scarlett & Co. v. Commissioner, 61 T.C.
795, 811 (1974), affd. 521 F.2d 786 (4th Cir. 1975); Gale v.
Commissioner, 41 T.C. 269, 272 (1963); Allied Furriers Corp. v.
Commissioner, 24 B.T.A. 457, 458 (1931); sec. 1.165-1(b), Income
Tax Regs. In this regard, section 1.165-1(d)(2)(i), Income Tax
Regs., provides as follows:
If a casualty or other event occurs which may
result in a loss and, in the year of such casualty or
event, there exists a claim for reimbursement with
respect to which there is a reasonable prospect of
recovery, no portion of the loss with respect to which
reimbursement may be received is sustained, for
purposes of section 165, until it can be ascertained
with reasonable certainty whether or not such
reimbursement will be received. * * *
A reasonable prospect of recovery exists when the taxpayer
has a bona fide claim for reimbursement from a third party and
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