                         T.C. Memo. 2000-249



                       UNITED STATES TAX COURT


         JAMES LEWIS AND LILLIAN E. HUNTER, Petitioners v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 11976-99.                      Filed August 9, 2000.


     James L. Hunter and Lillian E. Hunter, pro sese.

     Gary M. Slavett, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION

     VASQUEZ, Judge:    Respondent determined a deficiency of

$10,048 in petitioners’ 1996 Federal income tax.    The issues for

decision are whether petitioners have substantiated $5,704 in

medical and dental expenses under section 213 and whether

petitioners are entitled to deduct $38,829 in alleged casualty

losses under section 165.1



     1
        All section references are to the Internal Revenue Code
in effect for the year in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
                               - 2 -

                         FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.2

The stipulated facts and the related exhibits are incorporated

herein by this reference.   At the time of filing the petition in

this case, petitioners resided in Los Angeles, California.

     James Lewis Hunter and his wife, Lillian E. Hunter, filed a

joint Federal income tax return for 1996.   On Schedule A,

Itemized Deductions, of their return, petitioners claimed $10,530

in medical and dental expenses.   The expenses included medical

and dental bills that petitioners paid on behalf of their

daughter.3   After accounting for the 7.5-percent adjusted gross

income (AGI) threshold limitation under section 213,4

petitioners’ medical and dental expense deduction equaled $2,227.

     On their Schedule A, petitioners also claimed a $50,000

casualty loss for earthquake damage to the foundation of their

residence.   After the threshold limitations under section



     2
        We note that petitioner Lillian E. Hunter did not sign
the stipulation of facts. Because petitioners have not argued
that the stipulation of facts does not apply to Mrs. Hunter, we
treat the stipulation of facts as applying to both Mr. Hunter and
Mrs. Hunter.
     3
        On the return, petitioners listed their daughter and her
two children as dependents. Respondent does not challenge these
dependency exemptions.
     4
        Sec. 213 provides that “There shall be allowed as a
deduction the expenses paid during the taxable year, not
compensated for by insurance or otherwise, for medical care of
the taxpayer, his spouse, or a dependent * * * to the extent that
such expenses exceed 7.5 percent of adjusted gross income.”
                                 - 3 -

165(h),5 the casualty loss deduction equaled $38,829.

       After examining the return, respondent determined that

petitioners’ deductions were overstated by $41,056, resulting in

a deficiency of $10,048.    In the notice of deficiency, respondent

disallowed $5,704 of the $10,530 in medical and dental expenses

claimed by petitioners on the ground that petitioners had failed

to substantiate such amounts.6    Respondent also disallowed the

casualty loss deduction because petitioners had failed to show

that they had suffered a deductible loss in 1996 under section

165.

                               OPINION

Medical and Dental Expense Deduction

       Deductions are strictly a matter of legislative grace, and

taxpayers bear the burden of proving that they are entitled to

any deductions claimed on their return.    See Rule 142(a);

INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992).    Taxpayers

must substantiate amounts claimed as deductions by maintaining

the records necessary to establish such entitlement.    See sec.



       5
        Sec. 165(h) states in part that “Any loss * * * shall be
allowed only to the extent that the amount of the loss to such
individual arising from each casualty * * * exceeds $100" and
only to the extent that the net casualty loss “exceeds 10 percent
of the adjusted gross income”.
       6
        The remaining $4,826 in medical and dental expenses no
longer exceeds the 7.5-percent threshold limitation under sec.
213. Therefore, after respondent’s adjustments, petitioners
cannot deduct any of the remaining medical and dental expenses.
                                - 4 -

6001; Hradesky v. Commissioner, 65 T.C. 87, 89-90 (1975), affd.

per curiam 540 F.2d 821 (5th Cir. 1976); sec. 1.6001-1(a), Income

Tax Regs.    To substantiate medical and dental expenses under

section 213, the taxpayer must furnish the name and address of

each person to whom payment was made and the amount and date of

each such payment.    See sec. 1.213-1(h), Income Tax Regs.   If

requested by the Commissioner, the taxpayer must also furnish an

itemized invoice which identifies the patient, the type of

service rendered, and the specific purpose of the expense.     See

id.

      Respondent disallowed the $5,704 in medical and dental

expenses on the ground that petitioners had failed to provide

adequate documentation substantiating these expenses.

Petitioners, however, argue that they substantiated these

expenses with canceled checks that they wrote to their daughter.

According to Mr. Hunter’s testimony, their daughter used these

checks to pay for her and her children’s medical and dental

expenses.    Petitioners, however, have failed to provide any of

the canceled checks or other documents relating to these

expenses.7   We are not obligated to accept Mr. Hunter’s self-


      7
       The Court decided to recall the case during the second
week of the trial session so petitioners could locate and submit
any documents which could be used to substantiate the disallowed
medical and dental expenses. However, at the recall, petitioners
failed to appear and produce any canceled checks, receipts,
invoices, or other documentation verifying the disallowed
expenses.
                                 - 5 -

serving and uncorroborated testimony in this regard.      See Geiger

v. Commissioner, 440 F.2d 688, 689-690 (9th Cir. 1971), affg. per

curiam T.C. Memo. 1969-159; Tokarski v. Commissioner, 87 T.C. 74,

77 (1986).     Accordingly, we sustain respondent’s determination.

Casualty Loss Deduction

       Pursuant to section 165(a) and (c)(3), a taxpayer is allowed

a deduction for an uncompensated loss that arises from fire,

storm, shipwreck, or other casualty.      The loss must arise from an

event that is identifiable, damaging to property, sudden,

unexpected, and unusual in nature.       See White v. Commissioner, 48

T.C. 430, 433 (1967); Kielts v. Commissioner, T.C. Memo. 1981-

329.     Generally, a casualty loss is deducted in the year the loss

is sustained.     See sec. 165(a); Hunter v. Commissioner, 46 T.C.

477, 492 (1966); Allen v. Commissioner, T.C. Memo. 1984-630;

secs. 1.165-1(d)(1), 1.165-7(a)(1), Income Tax Regs.      In

circumstances where the full extent of the loss is not known, the

deduction can be claimed in a subsequent year.      See Kunsman v.

Commissioner, 49 T.C. 62, 72 (1967); Allen v. Commissioner,

supra.    However, one’s entitlement to a casualty loss deduction

cannot be postponed beyond the year in which the full extent of

the loss is known.    See Kunsman v. Commissioner, supra at 72;

Katz v. Commissioner, T.C. Memo. 1983-8.

       Respondent disallowed petitioners’ casualty loss deduction

on the basis that petitioners had failed to establish:      (1) The
                                 - 6 -

existence of the event that caused the casualty loss; (2) the

loss occurred in 1996; (3) the fair market value of petitioners’

residence before and after the alleged casualty; and (4) the

adjusted basis of their residence.

     Petitioners acknowledge that they did not sustain the

casualty in 1996.   Mr. Hunter testified that they originally

discovered the foundation damage in 1995 but believed the damage

resulted from an earthquake occurring in 1994.    Mr. Hunter stated

that, on the advice of their tax preparer,8 they decided to take

half of the casualty loss in the 1995 tax year and the remainder

in the 1996 tax year.

     A casualty loss from a single event generally cannot be

deducted piecemeal.     See Katz v. Commissioner, supra.   The losses

must be deducted either in the year the casualty was sustained or

in the year when the full extent of the loss is known.     See id.

We therefore find that because petitioners knew in 1995 the full

extent of the damage to their residence, they were not entitled

to deduct part of the alleged casualty loss in 1996.9


     8
       Petitioners used a professional tax preparation service
to electronically prepare and file their 1995 and 1996 returns.
     9
        If the casualty occurred in 1994, the loss generally can
only be deducted during that year or the year in which the full
extent of the loss is known. If such year is not properly before
the Court, then we are barred from addressing the merits of the
casualty loss deduction. See sec. 6214(b); Katz v. Commissioner,
T.C. Memo. 1983-8.
                              - 7 -

Accordingly, we also sustain this part of respondent’s

determination.

     To the extent not herein discussed, we have considered

petitioners’ other arguments and found them to be irrelevant or

without merit.

                                           An appropriate Order

                                      and Decision will be entered

                                      for respondent.
