                                           CHRISTINA A. ALPHONSO, PETITIONER v. COMMISSIONER                                      OF
                                                      INTERNAL REVENUE, RESPONDENT
                                                        Docket No. 17130–08.                     Filed March 16, 2011.

                                                  P owned stock in CV, a cooperative housing corporation as
                                               defined in sec. 216(b), I.R.C., and leased from CV pursuant to
                                               a so-called proprietary lease an apartment in a building that
                                               CV owned. A retaining wall that CV owned collapsed, thereby
                                               causing certain damage. CV levied an assessment against
                                               each of its stockholder-tenants, including P, with respect to
                                               the damage caused by the collapse of the retaining wall. P
                                               paid to CV the assessment (retaining wall assessment) that
                                               CV levied against her. P filed a Federal income tax return for
                                               her taxable year 2005 in which she claimed a casualty loss in
                                               an amount that was equal to the retaining wall assessment
                                               and a deduction in a reduced amount as required by the
                                               Internal Revenue Code with respect to that claimed casualty
                                               loss. R disallowed the claimed casualty loss and the claimed
                                               deduction with respect to that claimed loss. It is P’s position
                                               that she is entitled to a deduction under sec. 165(a) and (c)(3),
                                               I.R.C., or in the alternative under sec. 216(a), I.R.C., with
                                               respect to the retaining wall assessment. Held: P is not enti-
                                               tled to a deduction under sec. 165(a) and (c)(3), I.R.C., or sec.
                                               216(a), I.R.C., with respect to the retaining wall assessment.

                                                                                                                                    247




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                                      248                 136 UNITED STATES TAX COURT REPORTS                                      (247)


                                            Harvey R. Poe, for petitioner.
                                            Daniel P. Ryan, for respondent.

                                                                                   OPINION

                                        CHIECHI, Judge: This case is before us on respondent’s
                                      motion for summary judgment (respondent’s motion). We
                                      shall grant respondent’s motion.

                                                                                Background
                                         The record establishes and/or the parties do not dispute
                                      the following.
                                         At the time she filed the petition in this case, petitioner
                                      resided in New York.
                                         During 2005, the year at issue, 1 petitioner owned shares
                                      of stock in Castle Village Owners Corp. (Castle Village), a
                                      cooperative housing corporation as defined in section 216(b). 2
                                      Castle Village owned a tract of land that overlooks the Henry
                                      Hudson Parkway and Riverside Drive in New York, New
                                      York. At a time not disclosed by the record before the year
                                      at issue, Castle Village constructed on that land, inter alia,
                                      5 multistory buildings in which there are a total of 589
                                      apartments. (We shall refer collectively to the tract of land
                                      that Castle Village owned and the buildings and other
                                      improvements that it constructed on that land as the Castle
                                      Village complex.)
                                         As a stockholder of Castle Village, petitioner had the right
                                      to enter into a so-called proprietary lease (proprietary lease)
                                      with Castle Village with respect to the apartment in the
                                      Castle Village complex to which Castle Village had allocated
                                      the shares of stock in Castle Village that she owned. On a
                                      date not disclosed by the record before the year at issue, peti-
                                      tioner and Castle Village executed such a proprietary lease
                                      with respect to that apartment. 3 Petitioner lived in the
                                      apartment to which Castle Village had allocated her shares
                                           1 Unless
                                                 otherwise indicated, the factual background pertains to 2005, the year at issue.
                                           2 Unless
                                                 otherwise indicated, all section references are to the Internal Revenue Code in effect
                                      for the year at issue. All Rule references are to the Tax Court Rules of Practice and Procedure.
                                        3 The record does not contain the proprietary lease that petitioner and Castle Village executed.

                                      However, the record does contain a model proprietary lease (model proprietary lease) that the
                                      parties do not dispute is materially identical to the proprietary lease that petitioner and Castle
                                      Village executed.




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                                      (247)                        ALPHONSO v. COMMISSIONER                                        249


                                      of stock in Castle Village and with respect to which she had
                                      executed the proprietary lease.
                                        The model proprietary lease provided in pertinent part:
                                        WHEREAS, the Lessor [Castle Village] is the owner of the land and the
                                      buildings erected thereon at 110–200 Cabrini Boulevard, New York, New
                                      York, hereinafter called the buildings.
                                        WHEREAS, the Lessee [the stockholder of Castle Village] is the owner
                                      of lll shares of the Lessor, to which this lease is appurtenant and
                                      which have been allocated to apartment lll in the building; lll
                                      Cabrini Boulevard, New York, New York;
                                      DEMISED PREMISES AND TERM
                                        NOW, THEREFORE, in consideration of the premises, the Lessor hereby
                                      leases to the Lessee, and the Lessee hires from the Lessor, subject to the
                                      terms and conditions hereof, Apartment lll in the building at lll
                                      Cabrini Boulevard, New York, New York (hereinafter referred to as the
                                      apartment) for a term from lllll, 19ll, until December 31, 2036
                                      (unless sooner terminated as hereinafter provided). As used herein, ‘‘the
                                      apartment’’ means the rooms in the buildings as partitioned on the date
                                      of the execution of this lease designated by the above-stated apartment
                                      number, together with their appurtenances and fixtures and any closets,
                                      terraces, balconies, roof, or portion thereof outside of said partitioned
                                      rooms, which are allocated exclusively to the occupant of the apartment.
                                      Rent (Maintenance) How Fixed
                                        1. (a) The rent (sometimes called maintenance) payable by the Lessee for
                                      each year, or portion of a year, during the term shall equal that proportion
                                      of the Lessor’s cash requirements for such year, or portion of a year, which
                                      the number of shares of Lessor allocated to the apartment bears to the
                                      total number of shares of the Lessor issued and outstanding on the date
                                      of the determination of such cash requirements. Such maintenance shall
                                      be payable in equal monthly installments in advance on the first day of
                                      each month, unless the Board of Directors of the Lessor (hereinafter called
                                      Directors) at the time of its determination of the cash requirements shall
                                      otherwise direct. The Lessee shall also pay such additional rent as may be
                                      provided for herein when due.

                                                            *   *                 *       *   *       *   *
                                      Cash Requirements Defined
                                        (c) Whenever used herein the term ‘‘cash requirements’’ shall mean the
                                      estimated amount in cash which the Directors shall from time to time in
                                      their judgment determine to be necessary or proper for (1) the operation,
                                      maintenance, care, alteration and improvement of the corporate property
                                      during the year or portion of the year for which such determination is
                                      made; (2) the creation of such reserve for contingencies as they may deem
                                      proper; and (3) the payment of any obligations, liabilities or expenses
                                      incurred or to be incurred, after giving consideration to (i) income expected
                                      to be received during such period (other than rent from proprietary les-




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                                      250                136 UNITED STATES TAX COURT REPORTS                                          (247)


                                      sees), and (ii) cash on hand which the Directors in their discretion may
                                      choose to apply. The Directors may from time to time modify their prior
                                      determination and increase or diminish the amount previously determined
                                      as cash requirements of the corporation for a year or portion thereof. No
                                      determination of cash requirements shall have any retroactive effect on the
                                      amount of the rent payable by the Lessee for any period prior to the date
                                      of such determination. All determinations of cash requirements shall be
                                      conclusive as to all lessees.

                                                                      *        *      *       *   *       *   *
                                      Lessor’s Repairs
                                        2. The Lessor shall at its expense keep in good repair all of the buildings
                                      including all of the apartments, the sidewalks and courts surrounding the
                                      same, and its equipment and apparatus except those portions the mainte-
                                      nance and repair of which are expressly stated to be the responsibility of
                                      the Lessee pursuant to Paragraph 18 hereof.[4]

                                                             *  *    *   *                        *       *   *
                                      Penthouses, Terraces and Balconies
                                        7. If the apartment includes a terrace, balcony, or a portion of the roof
                                      adjoining a penthouse, the Lessee shall have and enjoy the exclusive use
                                      of the terrace or balcony or that portion of the roof appurtenant to the
                                      penthouse, subject to the applicable provisions of this lease and to the use
                                      of the terrace, balcony or roof by the Lessor to the extent herein permitted.
                                      The Lessee’s use thereof shall be subject to such regulations as may, from
                                      time to time, be prescribed by the Directors. * * * No planting, fences,
                                      structures or lattices shall be erected or installed on the terraces, bal-
                                      conies, or roofs of the buildings without the prior written approval of the
                                      Lessor. No cooking shall be permitted on any terraces, balconies or the
                                      roofs of the buildings, nor shall the walls thereof be painted by the Lessee
                                      without the prior written approval of the Lessor. * * *

                                                                      *        *      *       *   *       *   *
                                      House Rules
                                        13. The Lessor has adopted House Rules which are appended hereto, and
                                      the Directors may alter, amend or repeal such House Rules and adopt new
                                      House Rules. This lease shall be subject to such House Rules which, when
                                      a copy thereof has been furnished to the Lessee, shall be taken to be part
                                      hereof. The Lessee hereby covenants to comply with all such House Rules
                                      and see that they are faithfully observed by the family, guests, employees
                                      and subtenants of the Lessee. Breach of a House Rule shall be a default
                                      under this lease. The Lessor shall not be responsible to the Lessee for the
                                      nonobservance or violation of House Rules by any other Lessee or person.

                                        4 Par. 18(a) of the proprietary lease provided that the lessee is responsible for repairs and

                                      maintenance to the interior of the apartment that is the subject of the lease, including mainte-
                                      nance, repair, and replacement of plumbing, gas and heating fixtures, appliances (e.g., refrig-
                                      erators, air conditioners, ranges), lighting and electrical fixtures, fuse boxes and circuit break-
                                      ers, and electrical wiring running into and through the apartment.




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                                      (247)                        ALPHONSO v. COMMISSIONER                                        251


                                        As provided in paragraph 13 of the model proprietary lease
                                      (quoted above), that lease was subject to so-called house
                                      rules (Castle Village board house rules) that the board of
                                      directors of Castle Village (Castle Village board) had
                                      approved. Those house rules provided in pertinent part:
                                      GARDEN AND PLAY AREA
                                      The grounds of Castle Village include beautifully landscaped gardens and
                                      a children’s playground. Use of these areas is limited to building residents
                                      and their guests. Pets are not permitted. Residents are reminded to inform
                                      their guests and caretakers of the rules since everyone is expected to fol-
                                      low them.
                                      Security guards have been instructed to escort nonresidents off the prop-
                                      erty if they are not in the company of a resident. If a security guard does
                                      not recognize you as a Castle Village resident, you may be asked to show
                                      identification. Cooperate with him by doing so and telling him your name
                                      and apartment number.
                                      Usage areas in the garden:




                                      Use of designated areas
                                      A1 Safe Play......Wading pool, sandbox, climbing
                                      A2 .....................Activity has not been permanently established (see season-
                                      ally published Garden Rules [5]).
                                      A3 .....................Activity has not been permanently established (see season-
                                      ally published Garden Rules).

                                        5 The record does not contain the so-called Garden Rules to which the Castle Village board

                                      house rules referred.
                                                                                                                                         garden.eps




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                                      252                136 UNITED STATES TAX COURT REPORTS                                      (247)


                                      A4 .....................Activity has not been permanently established (see season-
                                      ally published Garden Rules).
                                      B2 .....................Activity has not been permanently established (see season-
                                      ally published Garden Rules).
                                      B1 Quiet Area...Sitting, reading, picnics
                                      C Quiet Area.....Sitting, reading
                                      Pit Active Play..Basketball, handball (10 a.m. to dusk) (1 hour limit on use
                                      when others are waiting)
                                                        All other grass areas may not be used. Please use the
                                                                        footpaths at all times
                                      The following are not permitted in the garden
                                      •    Audible radio or cassette players
                                      •    Bicycles without training wheels
                                      •    Pets
                                      •    Barbecues or any open fire
                                      •    Picking or cutting any part of the landscape
                                      •    Bats, sticks, racquets or hardballs
                                      •    Water balloons
                                      •    Smoking in any ‘‘A’’ Area
                                      •    Making noise after dusk
                                      •    Urinating
                                      •    Climbing trees
                                      •    Large water guns
                                      Tri/bicycle, scooter and roller blade rules
                                      Tricycles, bicycles with training wheels, roller blades/skates and scooters
                                      are permitted only on the pathway around Areas A2 and A3.
                                      Sandbox and wading pool rules (Area A1)
                                      • Keep sand in the sandbox. Do not dump sand into the wading pool.
                                      • Drain pool periodically throughout the day to ensure the circulation of
                                        clean water.
                                      • Unplug the drain each evening.
                                      • Children who are not toilet trained must wear diapers or pull-ups at all
                                        times.
                                      • Follow posted wading pool and sandbox guidelines.
                                      Trash and garbage
                                      Trash barrels are located throughout the garden for disposal of garbage
                                      and cigarette butts. Soiled diapers, used bandages, et cetera must be
                                      placed in sealed plastic bags before disposal. Large quantities of garbage
                                      resulting from picnics and parties should be taken to the garbage room in
                                      your building.
                                      Garden plots
                                      Vegetable garden plots are located behind Area A1. These plots are
                                      reserved for and tended by residents. This is NOT a communal garden.
                                      Please DO NOT pick from them. A subcommittee of the Garden Committee
                                      organizes this. Please contact them if you would like to use a plot. There




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                                      (247)                        ALPHONSO v. COMMISSIONER                                        253


                                      is also an herb garden from which all residents are invited to pick sprigs
                                      for cooking. It is located in the circle on the path between Buildings 120
                                      and 140.
                                      Garden gatherings
                                      Garden parties of 25 or fewer persons are permitted in Areas A2 and A3.
                                      Advance permission is required from the Management Office. A $25
                                      deposit (fee subject to change) is required to hold a date. The deposit will
                                      be refunded if the garden area is left clean and undamaged. Contact the
                                      Management Office to arrange a date and time for your event. If you wish
                                      to use the Playspace as a bad weather backup, separate arrangement must
                                      be made with the Playspace coordinators. The garden is not available for
                                      large parties or catered affairs. Tents may not be set up in the garden.

                                       ADULTS ARE RESPONSIBLE FOR SUPERVISING THEIR CHILDREN
                                                          IN THE GARDEN.
                                           ALL RESIDENTS, THEIR EMPLOYEES AND THEIR FRIENDS ARE
                                                 EXPECTED TO ADHERE TO THE GARDEN RULES.
                                           NON–RESIDENT CAREGIVERS/BABYSITTERS MAY ONLY USE THE
                                                GARDEN WHEN CARRYING OUT THEIR DUTIES.
                                            UNACCOMPANIED GUESTS STAYING IN THE COMPLEX MUST
                                                HAVE A PASS FROM THE MANAGEMENT OFFICE.
                                            REASONABLE NUMBERS OF GUESTS, FOR PLAY DATES AND
                                                         PICNICS ARE PERMITTED.
                                               Please exercise courtesy and common sense when using the garden
                                                               and respect the space of others.

                                         The Castle Village complex included a retaining wall
                                      (Castle Village retaining wall) that Castle Village owned.
                                      That retaining wall, which was approximately 70 feet high
                                      and approximately 250 feet wide, separated the Castle Vil-
                                      lage complex from certain public roads approximately 65 feet
                                      below that complex.
                                         On May 12, 2005, the Castle Village retaining wall col-
                                      lapsed, causing rocks and soil to fall onto the public roads
                                      below the Castle Village complex. The collapse of that
                                      retaining wall caused significant damage.
                                         Castle Village levied an assessment against each of its
                                      stockholders, including petitioner, with respect to the dam-
                                      age caused by the collapse of the Castle Village retaining
                                      wall. The assessment that Castle Village levied against peti-
                                      tioner was $26,390 (Castle Village assessment), which she
                                      paid.




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                                      254                136 UNITED STATES TAX COURT REPORTS                                      (247)


                                         Petitioner filed timely Form 1040, U.S. Individual Income
                                      Tax Return, for her taxable year 2005 (2005 return). In that
                                      return, petitioner claimed (1) a casualty loss of $26,390
                                      (claimed 2005 casualty loss), which was the amount of the
                                      Castle Village assessment that petitioner had paid to Castle
                                      Village in 2005, and (2) a casualty loss deduction of $23,188
                                      (claimed 2005 casualty loss deduction). 6
                                         Respondent issued to petitioner a notice of deficiency
                                      (notice) with respect to her taxable year 2005. In that notice,
                                      respondent, inter alia, disallowed the claimed 2005 casualty
                                      loss deduction. 7 That was because respondent determined
                                      that ‘‘The cause of the collapse of the Castle Village Retainer
                                      Wall was * * * the result of a gradual weakening of the
                                      wall’’ and that therefore the loss from that collapse does not
                                      constitute a casualty loss under section 165(c)(3).
                                         Respondent filed an amendment to answer in this case in
                                      which respondent alleged the following additional reason for
                                      respondent’s disallowance of the claimed 2005 casualty loss
                                      deduction: ‘‘Because the collapse [of the Castle Village
                                      retaining wall] occurred on Castle Village property, any cas-
                                      ualty loss deduction must be claimed by the corporation
                                      [Castle Village], and not by the stockholders.’’

                                                                                Discussion
                                        We must decide whether petitioner is entitled to a casualty
                                      loss deduction with respect to the Castle Village assessment
                                      that petitioner paid to Castle Village. 8
                                        It is petitioner’s position that she is entitled to a deduction
                                      under section 165(a) and (c)(3) or section 216(a) with respect
                                      to the claimed 2005 casualty loss. Respondent disagrees.
                                         6 Petitioner attached to the 2005 return Form 4684, Casualties and Thefts. In that form, peti-

                                      tioner reduced the amount of the claimed 2005 casualty loss as required by sec. 165(h)(1) and
                                      (2) in order to arrive at the amount of the claimed 2005 casualty loss deduction.
                                         7 Except for certain correlative adjustments, the only other determination that respondent

                                      made in the notice was to disallow certain employee business expenses of $5,266 that petitioner
                                      claimed in the 2005 return. In the petition, petitioner did not allege that that determination
                                      is erroneous. Therefore, petitioner is deemed to have conceded respondent’s determination to dis-
                                      allow the employee business expenses claimed in the 2005 return. See Rule 34(b)(4); Funk v.
                                      Commissioner, 123 T.C. 213, 215 (2004); Swain v. Commissioner, 118 T.C. 358, 363 (2002).
                                         8 Respondent does not concede, but assumes solely for purposes of respondent’s motion, that

                                      the loss from the collapse of the Castle Village retaining wall constitutes a casualty loss under
                                      sec. 165(c)(3). Respondent indicates in respondent’s motion that if we were to deny respondent’s
                                      motion, it would be respondent’s position that the loss from the collapse of the Castle Village
                                      retaining wall does not constitute a casualty loss under sec. 165(c)(3).




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                                      (247)                        ALPHONSO v. COMMISSIONER                                          255


                                         We consider first section 165(a) and (c)(3). Before turning
                                      to the parties’ respective arguments with respect to that sec-
                                      tion, we shall set forth certain general principles applicable
                                      to our analysis thereunder.
                                         As pertinent here, section 165(a) and (c)(3) allows an indi-
                                      vidual taxpayer to deduct ‘‘losses of property not connected
                                      with a trade or business or a transaction entered into for
                                      profit, if such losses arise from fire, storm, shipwreck, or
                                      other casualty’’. Generally, only the owner of the property
                                      damaged by a casualty is entitled to a deduction for a cas-
                                      ualty loss sustained to that property. See Dosher v. United
                                      States, 730 F.2d 375 (5th Cir. 1984); Draper v. Commissioner,
                                      15 T.C. 135 (1950). Where a taxpayer has a leasehold
                                      interest in property that is damaged by a casualty, the tax-
                                      payer is entitled to deduct a casualty loss sustained to that
                                      leasehold interest. Towers v. Commissioner, 24 T.C. 199, 239
                                      (1955), affd. on this issue sub nom. Bonney v. Commissioner,
                                      247 F.2d 237 (2d Cir. 1957).
                                         We turn now to the parties’ respective arguments under
                                      section 165(a) and (c)(3). In support of respondent’s position
                                      that petitioner is not entitled to a deduction under section
                                      165(a) and (c)(3) with respect to the claimed 2005 casualty
                                      loss, respondent relies principally on West v. United States,
                                      163 F. Supp. 739 (E.D. Pa. 1958), affd. 259 F.2d 704 (3d Cir.
                                      1958). 9
                                         In West, the taxpayer was a member of an incorporated
                                      social club (corporation) that owned a large tract of land on
                                      which the corporation constructed a dam for the purpose of
                                      creating an artificial lake. Id. at 740. The taxpayer, like all
                                      the members of the corporation, leased from that corporation
                                      under a 99-year lease a lot on which the taxpayer built a cot-
                                      tage. Id. at 741. Only members of the corporation were enti-
                                      tled to lease lots, and only persons who entered into leases
                                      with the corporation were entitled to be members of the cor-
                                      poration. Id. The lease that the taxpayer executed with the
                                      corporation gave the taxpayer only the right to use the lot.
                                      Id. The taxpayer’s membership in the corporation gave her
                                      (as well as the other members of that corporation) the right
                                         9 Respondent also relies on Orr v. Commissioner, T.C. Memo. 1960–147, and Hine v. Tomlin-

                                      son, 11 AFTR 2d 315, 63–1 USTC par. 9142 (M.D. Fla. 1962), revd. on other grounds 329 F.2d
                                      462 (5th Cir. 1964), in support of respondent’s position that petitioner is not entitled to a deduc-
                                      tion under sec. 165(a) and (c)(3) with respect to the claimed 2005 casualty loss.




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                                      256                136 UNITED STATES TAX COURT REPORTS                                      (247)


                                      to use the property of the corporation, including the artificial
                                      lake. Id. In 1955, a hurricane destroyed the dam, thereby
                                      causing the artificial lake to drain. Id. at 740. The corpora-
                                      tion levied an assessment of $4,500 against each member of
                                      the corporation in order to pay for rebuilding the dam and
                                      restoring the lake. 10 Id.
                                         The taxpayer claimed a deduction under section 165(a) and
                                      (c)(3) for the $4,500 assessment that she paid to the corpora-
                                      tion, which the Commissioner disallowed. Id.
                                         The U.S. District Court for the Eastern District of Pennsyl-
                                      vania (District Court) held that the taxpayer was not entitled
                                      to a deduction under section 165(a) and (c)(3) for the assess-
                                      ment that she had paid to the corporation. 11 Id. at 741. In
                                      so holding, the District Court concluded:
                                        Plaintiff clearly has a property interest in her leasehold and in the cot-
                                      tage built on it. She has no property interest, however, in the dam or lake.
                                      Her right to use corporate property comes solely and entirely from her
                                      membership. This right is conferred by the corporate charter and by-laws.
                                      Her claim to a casualty loss deduction would have more force if her rights
                                      in the lake were granted by the lease. In that case her property interest
                                      in the leasehold might well be considered to extend to an easement in the
                                      lake. [Id.]

                                        Respondent asserts that the facts in this case are analo-
                                      gous to the facts in West and that under West petitioner is
                                      not entitled to a deduction under section 165(a) and (c)(3)
                                      with respect to the claimed 2005 casualty loss.
                                         10 The respective taxpayers in Orr v. Commissioner, supra, and Hine v. Tomlinson, 11 AFTR

                                      2d at 317, 63–1 USTC par. 9142, at 87,224–87,225, were members of the same corporation of
                                      which the taxpayer in West was a member and also claimed respective deductions under sec.
                                      165(a) and (c)(3) for the respective amounts that they had paid to that corporation to repair the
                                      dam and restore the artificial lake that the hurricane had destroyed in 1955. In each of those
                                      cases, the Commissioner of Internal Revenue (Commissioner) disallowed the respective deduc-
                                      tions that the taxpayers claimed.
                                         11 In Orr v. Commissioner, supra, we also held that the taxpayers were not entitled to a deduc-

                                      tion under sec. 165(a) and (c)(3) for the assessment that they had paid to the corporation. In
                                      that case, we stated: ‘‘The opinions in the West case addressed themselves to the very issue that
                                      petitioner presents here and appeared to take into account the same considerations that are
                                      pressed upon us in the instant case. We think that the same result is called for here.’’
                                         In Hine v. Tomlinson, 11 AFTR 2d at 318, 63–1 USTC par. 9142, at 87,225, the U.S. District
                                      Court for the Middle District of Florida also held that the taxpayer was not entitled to a deduc-
                                      tion under sec. 165(a) and (c)(3) for the assessment that she had paid to the corporation. In that
                                      case, that court stated: ‘‘West and Orr were also cases based upon damages claimed to have re-
                                      sulted from the destruction of dam and lake at Pocono Lake Preserve. This Court approves and
                                      adopts the reasoning of Grim, J., in West as being sound and directly applicable to the present
                                      case.’’ Id.




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                                      (247)                        ALPHONSO v. COMMISSIONER                                        257


                                        Petitioner counters that Keith v. Commissioner, 52 T.C. 41
                                      (1969), is ‘‘more recent and more relevant’’ than West with
                                      respect to the issue presented here.
                                        In Keith, a corporation owned a certain tract of land in
                                      Alabama on which it constructed a dam for the purpose of
                                      enlarging a lake that existed on the land. Id. at 41–42.
                                      Thereafter, the corporation recorded a restrictive covenant on
                                      that tract of land and subdivided the tract into several lots.
                                      Id. at 42–43. The corporation then transferred by deed those
                                      lots to the respective stockholders of the corporation. Id. at
                                      43. In Keith, we described the property to which those deeds
                                      pertained as follows:
                                      The deeds covered the entire lakebed as well as the adjoining land. None
                                      of these deeds, or any other deeds involved in this case, indicate the por-
                                      tion, if any, of the property described therein that was covered by Green
                                      Valley Lake, beyond referring to the restrictive covenant. * * * [Id.]

                                         The taxpayer husband in Keith purchased two lots from
                                      the respective original owners of those lots, who transferred
                                      those lots to the taxpayer husband by deed. Id. A portion of
                                      the land transferred under the deed pertaining to each lot
                                      was ‘‘under the waters of the lake.’’ Id. Shortly after the tax-
                                      payer husband in Keith purchased the two lots, a flood
                                      destroyed the dam, thereby causing the lake to drain com-
                                      pletely. Id. The corporation decided to rebuild the dam. Id.
                                      at 43–44. The corporation paid the cost of that rebuilding by
                                      levying an assessment against the stockholders of the cor-
                                      poration in amounts that were proportionate to their respec-
                                      tive stock interests in the corporation. Id. at 44.
                                         The taxpayer husband and the taxpayer wife filed a joint
                                      return on which they claimed a deduction under section
                                      165(a) and (c)(3) for the assessment that the taxpayer hus-
                                      band had paid to the corporation. Id. The Commissioner dis-
                                      allowed that claimed deduction. Id.
                                         We held in Keith that the taxpayers were entitled to
                                      deduct under section 165(a) and (c)(3) the assessment that
                                      the taxpayer husband paid to the corporation. Id. at 48. In
                                      so holding, we distinguished the facts in Keith from the facts
                                      in West v. United States, 163 F. Supp. 739 (E.D. Pa. 1958).
                                      In doing so, we stated:
                                      Here petitioner’s [taxpayer husband’s] rights in the lake did not stem from
                                      his ownership of stock in GVI [the corporation]; indeed neither the certifi-




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                                      cate of incorporation nor the bylaws of GVI even purport to confer any
                                      such rights. * * * Petitioner’s rights in the lake stemmed primarily from
                                      his ownership in fee (not merely a lease), subject to the restrictive cov-
                                      enant, of a portion of the lakebed and the land adjoining the lake. While
                                      the restrictive covenant limited his rights in the lake in certain respects,
                                      it also conferred certain rights on him with respect to the use of the lake
                                      as well as the adjoining property, e.g., the right to go across the property
                                      of the other lot owners for recreational purposes.
                                         Disregarding for the moment the restrictive covenant, we think it
                                      apparent that petitioner, by virtue of his warranty deeds to a part of the
                                      lakebed and to the adjoining land, possessed valuable property rights in
                                      the lake which were destroyed by the flood. * * *
                                         [Keith v. Commissioner, supra at 46; fn. ref. omitted.]

                                            According to petitioner, Keith addresses
                                      the specific situation contemplated in West, whether a shareholder was
                                      entitled to a casualty loss deduction when his right to the damaged prop-
                                      erty, also a lake in this instance, was conferred by lease, thus giving peti-
                                      tioner an easement to use the lake. * * * The Court concluded * * * that
                                      the petitioner possessed valuable property rights in the lake which were
                                      destroyed by the flood, likening the petitioner’s rights to an equitable ease-
                                      ment for the benefit of the shareholders rather than for the benefit of the
                                      corporation, thus allowing petitioner to take a casualty loss deduction.
                                      * * *

                                         Petitioner asserts that the facts in the instant case are
                                      analogous to the facts in Keith and that Keith is controlling
                                      here. According to petitioner, she had ‘‘property rights in the
                                      use of the apartment and related grounds’’ under the model
                                      proprietary lease, ‘‘combined with the [Castle Village board]
                                      house rules and memoranda of the [Castle Village] Board of
                                      Directors, as well as the corporate Charter and By-Laws’’.
                                      Petitioner claims that the Castle Village board house rules
                                      ‘‘gave Petitioner the reasonable use of the common areas and
                                      grounds’’ and that she ‘‘must be considered to have possessed
                                      valuable property rights, something akin to an equitable
                                      easement * * * in the Castle Village property which was
                                      destroyed by the collapse of the [Castle Village] retaining
                                      wall. 12
                                           12 In   support of petitioner’s claims, petitioner advances the following assertions:
                                      While title to the Castle Village grounds and buildings rest [sic] with the cooperative corporation
                                      [Castle Village], the unit owners, by virtue of their Proprietary Leases to the apartments, com-
                                      bined with the house rules and memoranda of the Board of Directors, as well as the corporate
                                      Charter and By-Laws, had property rights in the use of the apartment and related grounds, so
                                      that their loss was the damage to the grounds which directly affected the apartments and the
                                      inability to use the related grounds, as well as the damage thereto.
                                        In Keith, the Board of Directors granted the deed to the lots to the owners (who were share-




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                                         We reject not only petitioner’s assertions regarding Keith v.
                                      Commissioner, 52 T.C. 41 (1969), but also her assertions
                                      regarding her alleged property interest in the common areas
                                      and the common grounds of the Castle Village complex
                                      (Castle Village grounds) that she claims entitles her to a cas-
                                      ualty loss deduction.
                                         With respect to petitioner’s assertions regarding Keith,
                                      petitioner is wrong in asserting that Keith addresses whether
                                      a stockholder is entitled to a casualty loss deduction where
                                      the stockholder possesses rights to the damaged property
                                      under a lease. The rationale for our holding in Keith was our
                                      finding that the taxpayer husband, ‘‘by virtue of his warranty
                                      deeds to a part of the lakebed and to the adjoining land, pos-
                                      sessed valuable property rights in the lake which were
                                      destroyed by the flood.’’ 13 Id. at 46. We expressly stated in
                                      Keith that the taxpayer husband’s rights in the drained lake
                                      ‘‘stemmed primarily from his ownership in fee (not merely a
                                      lease) * * * of a portion of the lakebed and the land
                                      adjoining the lake.’’ 14 Id. (fn. ref. omitted).
                                         With respect to petitioner’s assertions regarding her
                                      alleged property interest in the Castle Village grounds, peti-
                                      tioner is wrong in asserting that she possesses a property
                                      interest in those grounds that entitles her to a casualty loss
                                      deduction for damage to those grounds. We have carefully
                                      considered the model proprietary lease, the Castle Village
                                      holders), and also the Board approved and issued the restrictive covenants which gave and stat-
                                      ed the reasonable use of the lake for the lot owners. Id. at 42–43. In the case at hand, Petitioner
                                      acquired her Proprietary Lease (and stock) which, in effect, gave Petitioner title to her apart-
                                      ment and included the Board approved House Rules, which also gave Petitioner the reasonable
                                      use of the common areas and grounds. Even the Corporate Charter and By-Laws make it plain
                                      that the Corporation’s purpose is to provide apartment cooperative ownership for the residents,
                                      and this clearly reasonably included residential use of the common areas and grounds (as pro-
                                      vided in the By-Law provision with respect to House Rules). Thus, by the Court’s rationale in
                                      Keith, Petitioner must be considered to have possessed valuable property rights, something akin
                                      to an equitable easement for the benefit of the shareholders rather than for the benefit of the
                                      corporation, in the Castle Village property which was destroyed by the collapse of the retaining
                                      wall, and Petitioner must be allowed to take a casualty loss deduction.
                                        13 We found in Keith v. Commissioner, 52 T.C. 41, 46 (1969), that under the applicable law

                                      of Alabama ‘‘The owners of the land underlying an artificial lake and the land bordering upon
                                      such lake have property rights in the water by virtue of their ownership of the land. These
                                      rights include the right to make reasonable use of the lake.’’
                                        14 Petitioner also is wrong in asserting that in Keith we were ‘‘likening the petitioner’s rights

                                      to an equitable easement for the benefit of the shareholders rather than the benefit of the cor-
                                      poration’’. In Keith v. Commissioner, supra at 47–48, we found that the corporation, and not the
                                      taxpayer, possessed an equitable easement over the lake for the benefit of the corporation’s
                                      stockholders. As discussed above, we found in Keith that the taxpayer husband possessed a
                                      property interest in the lake because of certain deeds under which respective portions of the
                                      lakebed were transferred to him. Id. at 46.




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                                      board house rules, the corporate charter of Castle Village,
                                      and the bylaws of Castle Village on which petitioner relies in
                                      support of her assertion that she has such a property interest
                                      in the Castle Village grounds. 15 We find nothing in those
                                      documents that allows us to conclude that petitioner pos-
                                      sessed a leasehold interest, an easement, or any other prop-
                                      erty interest in the Castle Village grounds that entitles her
                                      to a deduction under section 165(a) and (c)(3) for damage to
                                      those grounds.
                                        As for the model proprietary lease and the Castle Village
                                      board house rules that were made part of that lease by para-
                                      graph 13 thereof, that lease provided that Castle Village
                                      leased to the tenant ‘‘Apartment lll in the building at
                                      lll Cabrini Boulevard’’ and that that apartment con-
                                      sisted of
                                      the rooms in the buildings * * * designated by the above-stated apartment
                                      number, together with their appurtenances and fixtures and any closets,
                                      terraces, balconies, roof, or portion thereof outside of said partitioned
                                      rooms, which are allocated exclusively to the occupant of the apartment.

                                      The model proprietary lease did not provide that Castle Vil-
                                      lage leased to petitioner any portion of the Castle Village
                                      grounds and did not provide that Castle Village granted to
                                      her any other property interest in those grounds. Although
                                      petitioner, like the other stockholders of Castle Village, had
                                      the right to use the Castle Village grounds subject to the
                                      Castle Village board house rules regarding the use of those
                                      grounds that were made part of the model proprietary lease
                                      by paragraph 13 thereof, we conclude that that lease and
                                      those rules did not grant to petitioner a leasehold interest,
                                      an easement, or any other property interest in the Castle Vil-
                                      lage grounds that entitles her to a deduction under section
                                      165(a) and (c)(3) for damage to those grounds.
                                         As for the corporate charter and bylaws of Castle Village,
                                      we find nothing in those documents that grants to petitioner,
                                      a stockholder of Castle Village, any property interest in the
                                      Castle Village grounds. We conclude that the corporate
                                      charter and bylaws of Castle Village do not grant to peti-
                                      tioner a leasehold interest, an easement, or any other prop-
                                      erty interest in the Castle Village grounds that entitles her
                                        15 The record does not contain the memoranda of the Castle Village board on which petitioner

                                      also relies.




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                                      (247)                        ALPHONSO v. COMMISSIONER                                         261


                                      to a deduction under section 165(a) and (c)(3) for damage to
                                      those grounds.
                                        On the record presented to us for purposes of respondent’s
                                      motion, we conclude that the facts in the instant case are
                                      analogous to the facts in West v. United States, 163 F. Supp.
                                      739 (E.D. Pa. 1958), and are not analogous to the facts in
                                      Keith v. Commissioner, 52 T.C. 41 (1969). Accordingly, we
                                      conclude that ‘‘the same result [as in West] is called for here.’’
                                      Orr v. Commissioner, T.C. Memo. 1960–147. We hold that
                                      petitioner is not entitled to a deduction under section 165(a)
                                      and (c)(3) with respect to the claimed 2005 casualty loss.
                                        We consider now petitioner’s alternative argument under
                                      section 216(a). 16 Section 216(a) provides in pertinent part:
                                         SEC. 216(a). ALLOWANCE OF DEDUCTION.—In the case of a tenant-stock-
                                      holder (as defined in subsection (b)(2)), there shall be allowed as a deduc-
                                      tion amounts (not otherwise deductible) paid or accrued to a cooperative
                                      housing corporation within the taxable year, but only to the extent that
                                      such amounts represent the tenant-stockholder’s proportionate share of—
                                            (1) the real estate taxes allowable as a deduction to the corporation
                                         under section 164 which are paid or incurred by the corporation on the
                                         houses or apartment building and on the land on which such houses (or
                                         building) are situated, or
                                            (2) the interest allowable as a deduction to the corporation under sec-
                                         tion 163 which is paid or incurred by the corporation on its indebtedness
                                         contracted—
                                              (A) in the acquisition, construction, alteration, rehabilitation, or
                                            maintenance of the houses or apartment building, or
                                              (B) in the acquisition of the land on which the houses (or apartment
                                            building) are situated.

                                      (For convenience we shall refer to a tenant-stockholder of a
                                      cooperative housing corporation as a stockholder of a
                                      cooperative housing corporation.)
                                        Section 216(a) allows two exceptions to the general rule
                                      that a stockholder of a corporation is not entitled to deduct
                                      the corporation’s expenses that the corporation paid or
                                      incurred. See Evans v. Commissioner, 557 F.2d 1095, 1099–
                                      1100 (5th Cir. 1977), affg. in part and revg. in part T.C.
                                      Memo. 1974–267. Those exceptions are for (1) real estate
                                      taxes that the corporation pays or incurs on the property
                                        16 Sec. 216(c) on which petitioner does not rely provides that the stock of a cooperative housing

                                      corporation owned by a so-called tenant-stockholder of that corporation is to be treated as prop-
                                      erty subject to the allowance for depreciation to the extent that the proprietary lease or right
                                      of occupancy conferred by reason of such stockholder’s ownership of that stock is used in a trade
                                      or business or for the production of income.




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                                      that it owns and (2) interest that the corporation pays or
                                      incurs on debt that it issued in order to, inter alia, acquire
                                      or construct the land or buildings that it owns.
                                        Petitioner asserts that section 216(a) should be interpreted
                                      to permit not only the two deductions that that section
                                      expressly allows, but also the casualty loss deduction that
                                      she claims here. According to petitioner:
                                      The stated purpose of I.R.C. § 216 and its predecessor, I.R.C. § 23(z) is to
                                      give tenants-stockholders of housing cooperatives the same tax benefits as
                                      are allowed to homeowners. Eckstein v. United States, 452 F.2d 1036, 1048
                                      (Ct. Cl. 1971) citing S.Rep.No. 1631, 77th Cong. 2nd Sess. (1942–2
                                      Cum.Bull. 504). The purpose of I.R.C. § 216 is not in dispute; the code sec-
                                      tion was enacted to place tenant-shareholders on equal footing with home-
                                      owners by allowing deductions for amounts paid to the corporation for
                                      mortgage interest and property taxes to ‘‘pass through’’ to the tenant-
                                      shareholders. * * *

                                                              *   *    *   *   *   *    *
                                        Respondent would have this Court believe that any deduction not specifi-
                                      cally included in I.R.C. § 216 is prima facie evidence of its disallowance.
                                      This is clearly not the case as evidenced by allowable tenant-shareholder
                                      deductions found elsewhere in the Code and by the decision in Keith
                                      allowing the shareholders a casualty loss deduction. * * * Congress recog-
                                      nized that tenant-shareholders required more benefits to be treated equi-
                                      tably under the tax code, thus it enacted additional provisions such as
                                      I.R.C. §§ 163 and 121.

                                         As the Supreme Court of the United States has held,
                                      ‘‘Where Congress explicitly enumerates certain exceptions to
                                      a general prohibition, additional exceptions are not to be
                                      implied, in the absence of evidence of a contrary legislative
                                      intent.’’ Andrus v. Glover Constr. Co., 446 U.S. 608, 616–617
                                      (1980). Petitioner does not cite any legislative history estab-
                                      lishing that Congress intended section 216(a) to permit the
                                      stockholders of a cooperative housing corporation to deduct
                                      any of such corporation’s expenses that it paid or incurred
                                      except for the two deductions that Congress expressly
                                      allowed in that section. Indeed, the following legislative his-
                                      tory of section 23(z) of the Internal Revenue Code of 1939
                                      (1939 Code), as amended by the Revenue Act of 1942, ch.
                                      619, sec. 128, 56 Stat. 826, a predecessor of section 216,
                                      establishes that Congress did not have any such intention:
                                      The general purpose of this provision [section 23(z) of the 1939 Code] is
                                      to place the tenant stockholders of a cooperative apartment in the same




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                                      (247)                        ALPHONSO v. COMMISSIONER                                        263


                                      position as the owner of a dwelling house so far as deductions for interest
                                      and taxes are concerned. [S. Rept. 1631, 77th Cong., 2d Sess. (1942), 1942–
                                      2 C.B. 504, 546; emphasis added.]

                                         We conclude that Congress intended in section 216(a) to
                                      allow the stockholders of a cooperative housing corporation
                                      deductions solely for amounts attributable to such corpora-
                                      tion’s real estate taxes and mortgage interest that it paid or
                                      incurred with respect to property that it owns. We hold that
                                      petitioner is not entitled to a deduction under section 216(a)
                                      with respect to the claimed 2005 casualty loss.
                                         We have considered all of the contentions and arguments
                                      of the parties that are not discussed herein, and we find
                                      them to be without merit, irrelevant, and/or moot.
                                         To reflect the foregoing,
                                                                     An order granting respondent’s motion and
                                                                   decision for respondent will be entered.

                                                                               f




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