Keith v. Commissioner
United States Tax Court
Petitioner owned a tract of land on a lake and a portion of the lakebed, subject to the terms of a restrictive covenant recorded by the corporation which regulated the recreational use of the lake and surrounding properties. A flash flood caused the drainage of the lake, destruction of a pier on petitioner's property, and damage to certain equipment.
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Petitioner owned a tract of land on a lake and a portion of the lakebed, subject to the terms of a restrictive covenant recorded by the corporation which regulated the recreational use of the lake and surrounding properties. A flash flood caused the drainage of the lake, destruction of a pier on petitioner's property, and damage to certain equipment. Held, petitioners are entitled to a casualty loss deduction under sec. 165(a) and (c)( 3), I.R.C. 1954, for the damage to the realty, measured by their share of the cost of restoring the lake plus the amount expended in replacing the pier. Held,…
1Opinion of the Court
OPINION
The question is whether petitioner is entitled to a deduction for a casualty loss, under subsections (a) and (c) (3) of section 165,3 as a result of the destruction of the lake and his recreation equipment in the flash flood. Petitioner contends that he is entitled to a deduction measured by the decrease in the fair market value of his real property, plus the fair market value of the destroyed equipment. Respondent does not deny that the damage caused by the flood arose from a “casualty”; but he urgently insists that the words of the restrictive covenant, “Green Valley, Inc. shall…
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