Chamales v. Commissioner T.C. Memo

2000-33

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Nature of the Case

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Facts

P are married and resided in Los Angeles, California. They purchased a property in Brentwood Park, at 359 North Bristol Avenue. O.J. Simpson (Simpson) owned and resided at the property located directly west of and adjacent to that being purchased by P. Simpson's address was 360 North Rockingham Avenue. During the escrow period Nicole Brown Simpson and Ronald Goldman were murdered. The Brentwood Park neighborhood surrounding the Simpson property became a media circus inundated with media personnel and equipment and with individuals drawn by the area's connection to the events. Police were summoned to the area for purposes of controlling the crowds, and barricades were installed at various Brentwood Park intersections to restrict traffic. Ps purchased their residence on for $2,849,000. Their real estate agent indicated that a decrease in value of 20 to 30 percent. Ps talked to a certified public accountant. In the course of preparing this return, Kitay discussed the possibility of claiming a deduction for casualty loss. After researching the feasibility, Kitay spoke with two area real estate agents regarding the amount by which petitioners' property had decreased in value. An expert appraisal was not obtained. An explanatory supplemental statement labeled 'Casualty Loss' was attached to the return. At the time Ps purchased their property, they were aware that the existing home required remodeling and repair. In the fall of 1994, Ps demolished most of the house. Reconstruction cost $2 million. This reconstruction was completed in December of 1996, and Ps moved into the residence. As of 1999, the area surrounding the former Simpson home was no longer inundated with media personnel or equipment.