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In their 1997 amended joint return, petitioners claimed an
amended casualty loss deduction of $168,266 with respect to the
Quissett, an increase of $30,010 in the casualty loss deduction
that petitioners claimed in Schedule A of their 1997 joint
return. As required, petitioners filed Form 4684, Casualties and
Thefts (amended Form 4684), with the Form 1040X for 1997. In
section A of the amended Form 4684 for 1997, Personal Use Prop-
erty, petitioners indicated (1) that the “Cost or other basis” of
the Quissett was $186,492, (2) that they had no “Insurance or
other reimbursement” with respect to the Quissett, (3) that they
had no gain from casualty or theft, (4) that the fair market
value before the casualty or theft of the Quissett was $175,000,
(5) that the fair market value of the Quissett after the casualty
or theft was $0, and (6) that the amount of the casualty loss
with respect to the Quissett, after applying certain limitations,
was $168,266.
Notice of Deficiency
In the notice issued to petitioners for the years at issue,
respondent determined, inter alia, to disallow a casualty loss
deduction of $138,256 that petitioners claimed in their 1997
joint return with respect to the Quissett. Respondent further
determined to disallow the net operating loss (NOL) carryback
deductions of $87,812 and $30,045 that petitioners claimed in
their respective amended returns for 1995 and 1996. Respondent
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