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exchange for $1,500,000.
On August 20, 2003, respondent issued to petitioner a notice
of deficiency (notice) with respect to petitioner’s taxable year
2000. In that notice, respondent determined, inter alia, that
petitioner is liable for the taxable year at issue for the
respective additions to tax under sections 6651(a)(1) and
6654(a).
On October 26, 2004, respondent received Form 1040, U.S.
Individual Income Tax Return, with respect to petitioner’s
taxable year 2000 (petitioner’s Form 1040 for 2000), which
respondent did not process as a return. In that form, peti-
tioner, inter alia, claimed a $256,975 deduction under section
165 for a theft loss with respect to the custom house.
On November 1, 2004, a jury awarded petitioner and Ms. Davis
$524,727 in compensatory damages (insurance litigation verdict)
with respect to the insurance litigation counterclaim. The jury
found, inter alia, that the property damages that petitioner and
Ms. Davis sustained were not fully satisfied by the $1,500,000
paid to them pursuant to the May 1, 2003 settlement agreement.
As of the time of the trial in this case, the Maryland Circuit
Court was considering in the insurance litigation numerous
posttrial motions and had not reduced the insurance litigation
verdict to final judgment.
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