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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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