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within the meaning of section 72(e)(3)(A)(ii) and (e)(6).
Consequently, the entire amount of the IRA distribution of
$11,281 is includable in petitioners' 1997 income. Sec.
72(e)(3)(A). The Court rejects petitioners' involuntary
conversion argument. Respondent is sustained on this issue.
The next issue is whether petitioners are entitled to a
deduction for a $300,000 casualty or theft loss for 1997. On
their Federal income tax return for 1997, petitioners, on Form
4684, Casualties and Thefts, reported a casualty or theft loss of
personal use property in the amount of $300,000. After
application of the $100 limitation and the 10 percent adjusted
gross income floor, as required by statute, the remaining amount
of the loss, $292,968.65, was claimed on Schedule A, Itemized
Deductions, as a casualty or theft loss deduction.
Petitioners contend they sustained the casualty or theft
loss as a result of the cancellation of petitioner's employer-
sponsored term life insurance policy, when his employment with
Berkeley was terminated in 1997. Petitioners claimed the
$300,000 loss because the face value of the life insurance policy
at the time of cancellation was estimated at $300,000. On Form
4686, petitioners described the lost property as "Insurance
Coverage Wrongfully Cancelled". Respondent determined that
petitioners were not entitled to a casualty or theft loss
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