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Casualty Loss Deduction
Respondent determined that petitioner is not entitled to a
casualty loss deduction of $155,836 claimed on the 1994 return.
We sustain respondent’s determination for the reasons discussed
below.
Section 165(a) permits a deduction for “any loss sustained
during the taxable year and not compensated for by insurance or
otherwise.” There is no question that the collapse of a portion
of the roof of the south building occurred in 1994 and was not
compensated for by insurance or otherwise. However, the
deduction under section 165 is allowed only for the year in which
the loss is “sustained”, as defined in section 1.165-1(d), Income
Tax Regs. Because we find that the loss in the instant case was
not sustained in 1994, the only year before us, we conclude the
deduction is not allowable in that year.
A loss is sustained when it is evidenced by closed and
completed transactions and fixed by identifiable events. Sec.
1.165-1(d)(1), Income Tax Regs. If the taxpayer has a claim for
reimbursement of a casualty loss and there is a reasonable
prospect of recovery, the casualty loss is not sustained until it
can be ascertained with reasonable certainty whether or not the
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