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a figure that encompassed his claim of damage to the building.16
Atlas filed its answer and counterclaims in August of that year.
Some time thereafter, the lawsuit was settled, with no damages
awarded.17
Based on the foregoing, we find that not only did petitioner
believe he had a reasonable prospect of recovery at the end of
1994, he in fact had a reasonable prospect of recovery with
respect to the building damage at the end of that year. Thus, we
sustain respondent’s disallowance of the deduction for 1994.
Depreciation Deduction
Petitioner claimed a depreciation deduction with respect to
the Property’s buildings of $4,179 for 1994. In an amendment to
answer, respondent asserted an increase in deficiency on the
ground that petitioner was not entitled to the claimed
depreciation. Respondent concedes he has the burden of proof on
this issue. See Rule 142(a). We hold that petitioner is
entitled to the depreciation deduction as claimed.
In support of his position, respondent argues that
petitioner improperly allocated basis between the Property’s
16 As noted in our Findings of Fact, the amount claimed by
petitioner in the lawsuit against Atlas is the sum of the repairs
estimated for the building ($68,365) and the amount of contents
damage asserted in the second claim ($70,095). Thus,
petitioner’s averments included a claim for compensation with
respect to damage to the building.
17 The date of the settlement is not in the record, although
it clearly occurred sometime after August 1995.
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