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1995 in the amount of $37,537 and determined an addition to tax
of $5,631 pursuant to section 6651(a)(1) for failure timely to
file an income tax return for 1995. The primary issue in the
notice of deficiency is whether petitioner is entitled to an
abandonment loss deduction in the amount of $196,923 for 1995.
OPINION
I. Abandonment Loss
A. General Rules
Section 165(a) allows “as a deduction any loss sustained
during the taxable year and not compensated for by insurance or
otherwise.” A deductible loss may arise from the permanent
withdrawal of property used in a trade or business. Secs. 1.165-
2(a), (c), 1.167(a)-8, Income Tax Regs. The basis for
determining the amount of the deduction is the adjusted basis
provided in section 1011 for determining the loss from the sale
or other disposition of property. Sec. 165(b).
In general, a deductible loss is sustained “during the
taxable year in which the loss occurs as evidenced by closed and
completed transactions and as fixed by identifiable events
occurring in such taxable year.” Sec. 1.165-1(d)(1), Income Tax
Regs. The “identifiable event” must constitute “some step that
irrevocably cuts ties to the asset” and must be observable by
outsiders. Corra Res., Ltd. v. Commissioner, 945 F.2d 224, 226
(7th Cir. 1991), affg. T.C. Memo. 1990-133. Losses deductible
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