- 6 - 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 deductiblePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011