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the casualty or (ii) the adjusted basis determined under section
1.1011-1, Income Tax Regs. Sec. 1.165-7(b)(1), Income Tax Regs.
The regulation also provides
However, if property used in a trade or business or held for
the production of income is totally destroyed by casualty,
and if the fair market value of such property immediately
before the casualty is less than the adjusted basis of such
property, the amount of the adjusted basis of such property
shall be treated as the amount of the loss for purposes of
section 165(a). [Id.]
For purposes here, the adjusted basis in the property destroyed
is the cost of such property. Secs. 1011 and 1012.
The parties apparently agree that, at least as far as the
majority of the items are concerned, the property destroyed was
used in a trade or business or was held for the production of
income and was totally destroyed. We, therefore, are concerned,
pursuant to section 1.165-7(b)(1), Income Tax Regs., with
petitioner’s bases or costs of the items destroyed. Petitioner,
however, has not produced any evidence as to what his bases or
costs in the various items may have been. Indeed, while they may
have had value to petitioner, it is clear that the memorabilia
had no costs to petitioner, and petitioner would have no bases in
these items. With respect to what petitioner describes as
“Labor/Inconvenience/Distress”, as we understand petitioner’s
testimony, the deduction was for mental upset, having to prepare
new lecture notes, etc., and for teaching. These are not items
of property the losses of which are deductible as casualty
losses.
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Last modified: May 25, 2011