Summaries - N
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Nelson v.
Commissioner
27 T.C.M. 158 P-H T.C. Memo ¶68,035 (1968).
Loblolly pine trees on taxpayers' residential property were attacked
and killed by southern pine beetles. Such attacks, which are unusual in
the area where the taxpayers live, kill trees within five to ten days. The
taxpayers deducted the decrease in value of their Property caused by the
loss of the trees. The deduction was taken under Section 165(c)(3)which
permits noncorporate taxpayers to deduct losses of property not
connected with a trade or business, if such losses arise, from fire,
storm, shipwreck, or other casualty, or from theft. The
Commissioner of Internal Revenue disallowed the deduction on the ground
that the loss incurred by the taxpayers was not a loss by
"casualty." The Commissioner contended that the term "other
casualty" refers to causal events which are sudden, violent, and
unexpected, and not to occurrences of nature such as the action of a
beetle in constructing egg galleries in a Loblolly pine tree. He also
argued that infestation of the taxpayers' trees was a usual and expected
occurrence.
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Norton v. The United States
551 F.2d 821, 213 Ct. Cl. 215, 77-1 USTC ¶ 9296, 39 AFTR2d
77-1000 (1977)
Capital gains and losses: Capital asset defined: Timber contracts: Integral part of trade or business.--Proceeds from the sale of a contract to cut and purchase timber were held to be ordinary income under the rationale of Corn Products Refining Co., 55-2 ustc ¶9746, and could not be reported as capital gain. The contract was not a capital asset since it was held to have been an integral part of the taxpayer's trade or business.
Penalties: Failure to pay tax: Reasonable cause: Burden of proof.--The
taxpayers failed to introduce evidence showing that their failure to pay
deficiencies was due to reasonable cause. Consequently, additions to tax
that had been assessed against them were upheld by the court.
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