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insurance company. On June 18, 1997, petitioner received a
letter from the Coast National Ins. Co., Inc., which stated that
his claim had been assigned to an adjuster and was currently
being investigated.
Section 165(a) allows a taxpayer to deduct losses that are
“sustained during the taxable year and not compensated for by
insurance or otherwise”. For an individual taxpayer, if a loss
is not incurred in connection with a taxpayer’s trade or business
or in a transaction entered into for profit, the taxpayer may
deduct the loss only if it arises from a fire, storm, shipwreck
or other casualty, or from theft. Sec. 165(c)(3). In the case
of a casualty loss, if there exists a claim for reimbursement for
which there is a reasonable prospect of recovery, no portion of
the loss may be deducted until it can be ascertained with
reasonable certainty whether or not such reimbursement will be
received. Sec. 1.165-1(d)(2)(i), Income Tax Regs.
There was no further evidence in the record regarding the
settlement of the insurance claim or the timing of any insurance
reimbursement. Since there was an insurance claim representing a
reasonable prospect of recovery in 1997, and there is no evidence
to show whether or not petitioner received any insurance
reimbursement in 1997, or in a later year, petitioner is not
entitled to a casualty loss deduction under section 165(a). See
Commissioner v. Harwick, 184 F.2d 835 (5th Cir. 1950), affg. a
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Last modified: May 25, 2011