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allows a taxpayer to deduct any loss from casualty to the extent
it exceeds $100, and the net casualty loss exceeds 10 percent of
the taxpayer’s adjusted gross income. Sec. 165(h). Section
1.165-1(b), Income Tax Regs., provides that, to be allowable as a
deduction under section 165(a), a loss must be evidenced by
closed and completed transactions, fixed by identifiable events,
and actually sustained during the taxable year, except disaster
losses which, pursuant to section 165(h) and section 1.165-11(a),
Income Tax Regs., may be deducted in the year preceding the
disaster if the taxpayer elects.
Section 1.165-7(b)(1), Income Tax Regs., provides, in
pertinent part, that the amount of the loss deductible under
section 165(a) shall be the lesser of either (i) the fair market
value of the property before the casualty reduced by the fair
market value of the property immediately after the casualty, or
(ii) the adjusted basis of the property. Section 1.165-
7(a)(2)(i), Income Tax Regs., provides that, in determining the
amount of the loss, the fair market value of the property
immediately before and immediately after the casualty shall
generally be ascertained by competent appraisal. The cost of
repairs to the property damaged is acceptable as evidence of the
loss of value if the taxpayer shows that (a) the repairs are
necessary to restore the property to its condition immediately
before the casualty, (b) the amount spent for repairs is not
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