Robert Lee and Rebecca Waters - Page 15




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          INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Welch v.             
          Helvering, 290 U.S. 111, 115 (1933); Higbee v. Commissioner, 116            
          T.C. 438, 446-447 (2001).                                                   
               As we see it, the principal issue in this case involves an             
          issue of timing; i.e., the year in which a loss may properly be             
          deducted.  We have decided that issue in respondent’s favor.                
          However, we can appreciate how petitioner might have concluded              
          that the foreclosure of the Hazelwood property was not complete             
          until January 1997, since that is when he apparently surrendered            
          possession of the property.  Similarly, although petitioner may             
          have discovered the unauthorized removal of furnishings and                 
          fixtures in 1996, we can appreciate how he might have concluded             
          that such removal was inextricably connected with the ultimate              
          fate of the Hazelwood property, which, at the time, was either in           
          or on the verge of foreclosure proceedings.                                 
               In view of the foregoing, we do not sustain respondent’s               
          determination of the penalty under section 6662(a) to the extent            
          that the underpayment of tax in this case is attributable to the            
          loss deduction under section 165(c)(2).                                     
               In contrast, we sustain respondent’s determination of the              
          penalty under section 6662(a) to the extent that the underpayment           
          of tax in this case is attributable to the adjustments conceded             
          by petitioners.  See supra note 2.  In this regard, we observe              
          that a taxpayer’s failure to keep adequate books and records or             






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