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related penalty under section 6662(a) of $19,145. By amendment
to answer, respondent asserted an increase in the deficiency. By
motion at the end of trial to conform the pleadings to the
evidence under Rule 41(b)(1), respondent asserted that petitioner
is liable for a fraud penalty under section 6663 on the portion
of the alleged underpayment attributable to a claimed casualty
loss deduction.
We must decide the following issues:
Whether respondent is entitled under the circumstances of
this case to amend his answer under Rule 41(b)(1) to assert fraud
under section 6663. We hold that he is not so entitled. Having
so held, we need not, and do not, address the question of whether
petitioner is liable for fraud.
Whether petitioner is entitled to a casualty loss deduction
in 1994 under section 165 with respect to the collapse of a
portion of the roof of petitioner’s warehouse. We hold that
petitioner is not entitled to a casualty loss deduction because
there was a reasonable prospect of recovery of insurance proceeds
during 1994.
Whether, and to what extent, petitioner is entitled to a
depreciation deduction during the year in issue. We hold that
petitioner is entitled to a depreciation deduction in the amount
claimed on his 1994 Federal income tax return, based on his
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