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market value of the residence. He has failed to show that his
points are qualified residence interest.1
Casualty Loss
Petitioner testified that he suffered a casualty loss
consisting of two items: a “flat tire” on his automobile and “a
broken vase or bottle, perfume bottle, large one that my dog
broke” that was a gift. Petitioner submitted to respondent’s
counsel a Form 4684, Casualties and Thefts, listing the cost of
the tire as $174.62 and the cost of the vase or perfume bottle as
$800.
Losses may be deductible under section 165(a) to the extent
“not compensated for by insurance or otherwise.” In the case of
an individual, section 165(c)(3) allows a taxpayer to claim as a
deduction any loss from theft or casualty sustained during the
taxable year. The loss is allowed only to the extent that it
exceeds $100 and the net casualty loss is in excess of 10 percent
of adjusted gross income. Sec. 165(h). The amount of the loss
is the lesser of (1) the fair market value of the property
immediately before the casualty reduced by the fair market value
after the casualty, or (2) the adjusted basis of the property.
1Were the points qualified residence interest, petitioner
would be required to amortize the points over the life of the
loan unless he provided sufficient evidence that the loan
proceeds were used to purchase or improve the residence. Sec.
461(g)(1) and (2).
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Last modified: May 25, 2011