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there exists a claim for reimbursement with respect to which
there is a reasonable prospect of recovery, no portion of the
loss is sustained under section 165 until it can be ascertained
with reasonable certainty whether such reimbursement will be
received. Whether a reasonable prospect of recovery exists is a
question of fact. See Halliburton Co. v. Commissioner, 93 T.C.
758, 770 (1989), affd. 946 F.2d 395 (5th Cir. 1991); Colish v.
Commissioner, 48 T.C. 711, 715 (1967); sec. 1.165-1(d)(2)(i),
Income Tax Regs. The prospect of recovery must be based upon a
legal right to claim reimbursement from a third party in the year
the loss occurs. Halliburton Co. v. Commissioner, supra at 772;
Colish v. Commissioner, supra at 717; sec. 1.165-1(d)(2)(i),
Income Tax Regs. In this connection we note that we concluded in
Halliburton Co. v. Commissioner, supra at 780, as follows:
As of December 31, 1979, Iranian political power
was in a state of disarray, and the United States had
been unable even to commence negotiations with Iran to
resolve the crisis even though a principal stumbling
block had been removed, i.e., the Shah had left the
United States for Panama. Not until the fall of 1980,
after a series of events occurred in 1980, including
the Iranian clerical faction’s assumption of power, the
outbreak of the Iran-Iraq war, increased United States
economic sanctions against Iran, the failed American
rescue mission, the death of the Shah, and the
impending change in the U.S. Administration, did Iran
make overtures to settle the crisis. If anything,
these critical events are so clearly independent of the
factual circumstances that existed as of December 31,
1979, as to reinforce the conclusion that the elements
of a reasonable prospect of recovery were absent,
rather than present, as of that date. Equally clearly,
the fact that the Algiers Accords came into being in
1981 is not, in and of itself, an indication that such
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