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Respondent determined a deficiency in petitioners' 1998
Federal income tax of $17,280.84 and an addition to tax under
section 6651(a) of $4,370.11 for failure to file timely a Federal
income tax return for 1998. Petitioners concede as correct
respondent's adjustments for: (a) Taxes of $7,200 deducted on
Schedule A, Itemized Deductions; (b) charitable contributions of
$9,400 deducted on Schedule A; and (c) the addition to tax under
section 6651(a) for failure to file timely. Petitioners also
concede that they are entitled to only two dependency exemptions.
Respondent concedes that there will be no adjustment for:
(1) Capital gain income in the amount of $4,283; or (2)
miscellaneous expenses of $86 on Schedule A.
The parties agree that the only issue remaining for decision
by the Court is whether petitioners are entitled to deduct on
Schedule A casualty and theft losses totaling $37,222.
Some of the facts have been stipulated and are so found.
The stipulation of facts and exhibits received in evidence are
incorporated herein by reference. At the time the petition was
filed, petitioners resided in Berkeley, California.
Background
Petitioner Milton Werner has been a teacher most of his
career and is now a high school principal. Prior to the year at
issue, he accepted a new job "across the bay" in Palo Alto,
Callifornia. He and his family sold their home, put their
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