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Mercer initially refused to pay any insurance benefits in
response to petitioner’s claim. The insurance company questioned
whether the flood and resulting damage occurred prior to the
policy’s taking effect. Petitioner brought suit against Mercer
in 1995, in the Superior Court of New Jersey. On July 31, 1998,
petitioner received a payment of $12,500 from Mercer in
settlement of her lawsuit and claim. The record does not reflect
how the $12,500 amount was computed.
Petitioner also had been having financial difficulties since
approximately 1989. She stopped paying her mortgage and was
being threatened with foreclosure. In 1993, the Metropolitan
Savings Bank commenced foreclosure proceedings on petitioner’s
residence. On April 27, 1995, the property was sold for $108,750
by the Sheriff of Monmouth County, New Jersey.
Tax Returns
Petitioner filed her 1994 Federal income tax return on
December 7, 1996. On Form 4684, Casualties and Theft, petitioner
reported a total casualty loss in the amount of $102,7411 as a
result of the flood on August 26, 1994. After statutory
reductions, petitioner deducted on Schedule A--Itemized
Deductions, the amount of $95,311.
The copy of petitioner’s 1995 Federal income tax return in the
1 Amounts reflected on the tax returns have been rounded to
the nearest full dollar amount.
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