Tommy Lee Randle and Joyce Faye Randle - Page 9

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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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