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entered into an arrangement where Mr. Tripaldi lent approximately
$30,000 to petitioner for the purchase of the home. The loan
obligation was to be secured by petitioner’s condominium. No
loan documents were created to memorialize the loan. In other
words, the parties’ intent was to enter into a secured loan
transaction by use of the 50-percent interest quitclaimed to Mr.
Tripaldi. As exhibited by the quitclaim deed, dated August 29,
1994, Mr. Tripaldi testified that he relinquished his “security
interest” in the condominium when petitioner purportedly
satisfied her loan obligation.
Petitioner filed and was granted an automatic extension of
time to file her 1995 Federal income tax return. Petitioner
timely filed her 1995 Federal income tax return, in which she
reported a casualty loss of $21,935.49 attributable to damage to
the condominium from the 1994 Northridge earthquake. Petitioner
attached to her 1995 return a four-page, single-spaced, itemized
list of necessary repairs to the condominium (repair list).
Petitioner based the repair list, categorized by the estimated
cost for damage which occurred in each room, from an itemized
list of repairs prepared by State Farm Insurance Co. (State
Farm), dated June 20, 1996. Petitioner did not make the repairs
or incur any repair expenses for items listed on the repair list
during 1995 or any other year.
On her 1994 Federal income tax return, petitioner claimed a
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