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Claimed Casualty Loss Deduction
Respondent determined to disallow a casualty loss deduction
of $138,256 that petitioners claimed in their 1997 joint return
with respect to the Quissett.8 Petitioners contend that on
January 3, 1997, a storm caused damage to the Quissett and that
therefore they are entitled to a casualty loss deduction for
1997. Respondent contends, inter alia, that petitioners have
failed to establish that the alleged storm occurred and that the
Quissett sustained the alleged damage during that alleged storm.
Section 165(a) allows a deduction for any loss sustained
during the taxable year and not compensated for by insurance or
otherwise. A loss is treated as sustained during the taxable
year in which the loss occurs, as evidenced by closed and com-
pleted transactions and as fixed by identifiable events occurring
in such taxable year. Sec. 1.165-1(d)(1), Income Tax Regs.
As pertinent here, section 165(c)(3) limits the deduction
allowed by section 165(a) in the case of an individual to a loss
that arises from fire, storm, shipwreck, or other casualty, or
8Respondent further determined to disallow the NOL carryback
deductions that petitioners claimed in their 1995 amended joint
return and their 1996 amended joint return of $87,812 and
$30,045, respectively. Resolution of respondent’s determinations
to disallow petitioners’ claimed NOL carryback deductions for
1995 and 1996 will flow automatically from our findings and
resolution of respondent’s determination to disallow petitioners’
casualty loss deduction claimed for 1997.
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