- 26 -
subjective beliefs are also relevant. Estate of Wagner v.
Commissioner, supra; see Boehm v. Commissioner, supra; see also
Ramsay Scarlett & Co. v. Commissioner, 61 T.C. 795, 812 (1974),
affd. 521 F.2d 786 (4th Cir. 1975). Denial of liability by an
insurance company is one factor in deciding whether a reasonable
prospect of recovery exists, but not the sole factor. Gale v.
Commissioner, 41 T.C. 269, 276 (1963). The fact that a taxpayer
files a lawsuit to recover the loss gives rise to an inference of
a reasonable prospect of recovery. Dawn v. Commissioner, 675
F.2d 1077, 1078 (9th Cir. 1982), affg. T.C. Memo. 1979-479.
The evidence in this case shows that petitioner had a
reasonable prospect of recovery in 1994 with respect to his
claimed casualty loss. Although Atlas developed suspicions
regarding petitioner’s contents claim, Atlas sought a sworn proof
of loss in October 1994. At some point Atlas offered $22,000
with respect to the damage to the building. Petitioner rejected
it and was seeking to invoke an appraisal as of December 1994.
On December 21, petitioner intended to make repairs to the
building once the insurance proceeds were received. Petitioner
was still pursuing his claim in March 1995, when he gave
testimony in an examination under oath with a representative of
Atlas. There was no denial of coverage by Atlas until May 1995.
Further, petitioner and Julicher Sports filed suit against Atlas
in July 1995, asserting that petitioner was entitled to $137,460,
Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 NextLast modified: May 25, 2011