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With respect to each item identified on each schedule,
petitioner reported that the cost or other basis of the property
was the same as the fair market value of the property before the
casualty. Petitioner also reported that each item had a fair
market value of zero after the casualty. However, once
petitioner calculated the total purported loss for each category
of property, petitioner reduced the loss for what she described
as “depreciation” as follows:
Category FMV before Reduction for Reported Percentage
casualty depreciation loss reduction
Clothing $9,217.50 $317.50 $8,900.00 3.3%
Appliances 5,850.00 900.00 4,950.00 15.4
Tools 1,500.00 0.00 1,500.00 0.0
Electronics 9,200.00 1,700.00 7,500.00 18.5
On January 7, 2004, respondent issued petitioner a notice of
deficiency for taxable year 2001. In the notice of deficiency,
respondent disallowed petitioner’s claimed casualty loss
deduction and determined petitioner is liable for a deficiency in
the amount of $2,745.
Discussion
As a general rule, the determinations of the Commissioner in
a notice of deficiency are presumed correct, and the taxpayer
bears the burden of proving the Commissioner’s determinations in
the notice of deficiency to be in error. Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933). As one exception to this
rule, section 7491(a) places upon the Commissioner the burden of
proof with respect to any factual issue relating to liability for
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