Milton Craig Werner and Barbara K. Werner - Page 4

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          belongings in "storage units", and rented another residence.                
          Abnormally wet weather during the year caused the storage units             
          to leak badly.                                                              
               Petitioner Barbara Werner's father, Col. James Richard                 
          Kelly, was a former dean of the New Mexico Military Academy.  An            
          avid reader and historian, he amassed a large personal library.             
          The collection included books that were leather bound,                      
          antebellum, and signed editions.  The items were subjected to               
          water damage, most beyond repair.                                           
               On Schedule A of petitioners' Federal income tax return,               
          petitioners claimed a casualty loss deduction of $37,222.                   
          Included with the return was a Form 4684, Casualties and Thefts,            
          reporting the loss of the books in the amount of $30,000 and the            
          loss of some furniture accounting for the balance of the claimed            
               During the examination of petitioners' return, petitioners             
          presented to the auditor a copy of an appraisal prepared by an              
          appraiser certified by the International Society of Appraisers.             
          According to the cover letter forwarding the appraisal to                   
          petitioner Milton C. Werner:                                                
               The objective of the appraisal, at your request, was to                
               estimate the Fair Market Value of the household                        
               furniture prior to damage, and in current damaged                      
               condition.  The books were appraised at Replacement                    
               Value, for the purpose of settling an insurance claim.                 
               These values are effective as of the inspection date.                  

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