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South Carolina (1976) as a result of his violation of South
Carolina’s gambling laws. Petitioners have not argued that this
deduction falls under section 162 as an ordinary and necessary
business expense, so we rely on the general principle that a
deduction for property forfeited under Federal or State
forfeiture laws, if allowed at all, falls under the loss
deduction provisions of section 165. See Fuller v. Commissioner,
213 F.2d 102, 105-106 (10th Cir. 1954), affg. 20 T.C. 308 (1953);
Holmes Enters., Inc. v. Commissioner, 69 T.C. 114, 116-117
(1977); Holt v. Commissioner, 69 T.C. 75, 78-79 (1977), affd. per
curiam 611 F.2d 1160 (5th Cir. 1980); see also Gambina v.
Commissioner, 91 T.C. 826, 827 n.3 (1988); Bailey v.
Commissioner, T.C. Memo. 1989-674, affd. without published
opinion 929 F.2d 700 (6th Cir. 1991); Mack v. Commissioner, T.C.
Memo. 1989-490; Farris v. Commissioner, T.C. Memo. 1985-346,
affd. without published opinion 823 F.2d 1552 (9th Cir. 1987).
Accordingly, we must decide whether petitioners are entitled to a
loss deduction under section 165 for 1999.
Section 165(a) allows a deduction for “any loss sustained
during the taxable year and not compensated for by insurance or
otherwise.” In the case of an individual, the deduction is
limited to losses incurred in the individual’s trade or business
or in any transaction entered into for profit and to certain
casualty losses. Sec. 165(c). The facts disclose that
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