Tommy Lee Randle and Joyce Faye Randle - Page 10

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          when there is a substantial possibility that such claim will be             
          resolved in the taxpayer's favor.  See Ramsay Scarlett & Co. v.             
          Commissioner, supra at 811.  The issue is one of fact, to be                
          decided on the basis of all of the facts and circumstances.  See            
          Boehm v. Commissioner, 326 U.S. 287, 292-293 (1945); Dawn v.                
          Commissioner, 675 F.2d 1077, 1078 (9th Cir. 1982), affg. T.C.               
          Memo. 1979-479; sec. 1.165-1(d)(2)(i), Income Tax Regs.                     
               Petitioners’ residence was damaged by the Northridge                   
          earthquake on January 17, 1994.  Thereafter, petitioners filed an           
          application for Disaster Housing Assistance with FEMA and                   
          obtained financial assistance no later than August 1994.                    
          Although the check that petitioners received may have been for              
          less than they would have wished, the record suggests that                  
          petitioners did not appeal FEMA’s August 26, 1994, decision.                
               Although petitioners filed a second application with FEMA in           
          January 1995, this application was for damage caused by flooding            
          rather than by earthquake.  In any event, FEMA responded to this            
          application on April 4, 1995, and denied petitioners’ appeal                
          later that month.                                                           
               Finally, petitioners sought disaster relief from both SBA              
          and the California State Department of Social Services.  However,           
          the record is not clear whether the relief sought was in respect            
          of damage caused by the Northridge earthquake.  In any event,               
          both SBA and the California State Department of Social Services             

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