White v. Comm'r of Internal Revenue, Docket No. 4281-65.

• Decision Date: 26 June 1967
• Docket Number: Docket No. 4281-65.
• Citation: 48 T.C. 430
• Parties: JOHN P. WHITE AND AGNES S. WHITE, PETITIONERS V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

48 T.C. 430

JOHN P. WHITE AND AGNES S. WHITE, PETITIONERS V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 4281-65.

Tax Court of the United States.

Filed June 26, 1967.

John P. White, pro se.

Frank T. Wrenick, for the respondent.

Petitioners are husband and wife. In the fall of 1963 after assisting his wife in alighting from their family automobile, the husband accidentally slammed the door on his wife's hand. Her diamond engagement ring absorbed the full impact of the blow which broke two flanges of the setting holding the diamond in place. The diamond was dislodged and irretrievably lost in a leaf-covered gravel driveway. Diligent efforts to recover the diamond were unsuccessful. Held, the slamming of the automobile door upon the wife's ring and the resulting loss of the diamond entitle the petitioners to deduct the diamond's loss as a loss arising from ‘other casualty’ under sec. 165(c)(3), I.R.C. 1954.

HOYT, Judge:

Respondent disallowed a claimed loss deduction of $1,200 and assessed against petitioners an income tax deficiency for the taxable year 1963 in the amount of $276. The sole question for our decision is whether the loss by petitioners of a diamond from petitioner Agnes' engagement ring is a casualty loss allowable under section 165(c)(3), I.R.C. 1954.¹

FINDINGS OF FACT

Some of the facts have been stipulated by the parties and such facts together with the stipulated exhibits are incorporated herein by this reference and adopted as our findings.

Petitioners are John P. and Agnes S. White, husband and wife, who maintained their legal residence in Gates Mills, Ohio, both at the time of filing their petition herein and at trial. For the taxable year 1963,² they filed their joint Federal income tax return with the district director of internal revenue in Cleveland, Ohio. John is a lawyer by profession and in 1963 he was employed in Cleveland by the Glidden Co.

In 1950 John purchased a diamond engagement ring in Chicago, Ill., for Agnes. The diamond was a 1.38-carat stone set as a solitaire in a simple four- pronged mounting. He paid $1,200 for the ring at the time of purchase.

The facts giving rise to the claimed casualty were described by petitioner John as ‘painfully simple.’ On a windy fall day in October of 1963, John was driving Agnes home from an afternoon of shopping. He drove into the crushed-gravel driveway of their Gates Mills, Ohio, residence and after getting out proceeded to the other side of the car, as was his custom, to assist his wife. John then opened the door at the right for Agnes while focusing his attention on one of their five young children. Agnes got out of the car from the passengers' side.

After Agnes had alighted, she reached into the car again with one hand to retrieve something left on the seat. At the same time, John, unaware of his wife's action, pushed the door closed forcefully to overcome a wind which was then blowing. Before the door closed completely, John realized that Agnes had inserted her hand through the open door and into the car. He reached for the door in an effort to stop its closing, but, unfortunately, missed, and the door slammed on Agnes' hand. The full impact of the slammed door was absorbed by the ring. Two flanges holding the solitaire diamond in place were broken by the impact. Agnes, crying with pain, quickly withdrew her injured hand, shaking it vigorously. The diamond dropped or flew out of the broken setting and has never been seen since that time.

Immediately, an intensive search was launched which continued for weeks. Initially, a human chain of the five White children was formed. They combed intensively a 40-foot area of the driveway, as well as part of the adjoining lawn. Additionally, the driveway gravel in the immediate vicinity of the car was raked and put through a sieve. The search continued in a less intensive manner even after the snows came; petitioners were still hopefully looking for the stone upon occasion at the time of trial more than 3 years later. Unfortunately, all of these efforts were unsuccessful, and the diamond has never been recovered.

The ring had been insured for several years following its purchase, but was not insured during 1963 or for some years prior thereto. The fair market value of the diamond in October of 1963 was not less than the purchase price of the ring paid by John in 1950, $1,200. Agnes suffered an uncompensated loss of $1,200 in 1963, as a direct and proximate result of the accidental slamming of the car door upon her hand and ring.

In their return for 1963 petitioners claimed a deduction of $1,200 for the casualty loss of the diamond describing it as follows:

Uninsured loss of 1.38 carat diamond from engagement ring setting caused by car door accidentally being slammed on wife's hand. Loss of gem directly the result of breakage of setting from sudden impact of car door upon ring. (Loss based upon actual appraised value of ring.)

On April 12, 1965, respondent mailed a notice of deficiency to petitioners in which he determined an income tax deficiency for the year 1963 of $276. The deficiency was based upon an addition to income of $1,200 which resulted from respondent's disallowance of the $1,200 casualty loss petitioners had claimed for the ring. The statutory notice included the following explanation to petitioners:

It is determined that the loss deduction of $1,200.00 which you claimed on your income tax return for the taxable year ended December 31, 1963 for the loss of a diamond, is not allowable under any section of the Internal Revenue Code. Accordingly, your income is increased by that amount.

At no time prior to trial did respondent contest or raise the issue of the amount of the loss or the value of the diamond lost by Agnes from her ring.

OPINION

Respondent maintains that Agnes did not suffer a casualty loss within the meaning of section 165(c)(3) of the Internal Revenue Code of 1954. [F N2] Respondent applies the familiar principle of ejusdem generis and concludes that the events which gave rise to the loss of the ring were not like or similar to a ‘fire, storm, (or) shipwreck’ and therefore do not constitute ‘other casualty’ under section 165(c)(3).

Petitioners contend that the circumstances surrounding the diamond's loss place it within the ‘other casualty’ provision of section 165(c)(3). They urge that the loss was due to chance, and occurred suddenly and unexpectedly as a result of accident. They rely primarily upon our recent opinion in William H. Carpenter, T.C. Memo. 1966-228, on appeal (C.A. 6, Apr. 3, 1967), which they regard as factually indistinguishable, and in which we allowed a casualty loss deduction for damage to an engagement ring accidentally ground up in a garbage disposal. Respondent does not attempt to distinguish Carpenter or to escape its rationale here. Instead he flatly submits it was incorrectly decided and should not be applied. He urges that the loss suffered here was nothing more or less than an ordinary, everyday, domestic, household mishap and compares it to a mythical Johnny's tearing out of the knee of his new suit on his way to church or to his mother's breaking some china as she does the evening dishes. We cannot agree that the facts here present an ordinary, common, everyday domestic loss or mishap. Agnes did not just misplace, mislay, or lose her ring. If she had merely dropped it in the leaves on the gravel driveway we would be faced with that situation, but the evidence before us paints a far different picture of the casualty loss claimed here. The cases cited and relied on by respondent are inapposite.

With respect to the presence of accepted and essential casualty attributes, we find little to distinguish the situation now confronting us from other cases in which loss deductions arising from ‘other’ casualties have been allowed. The events giving rise to the undisputed loss here were sudden, unexpected, violent and not due to deliberate or willful actions by petitioners or either of them. These events involved the application of considerable destructive force to the subject ring and as an immediate, direct, and proximate result thereof Agnes lost the diamond from her solitaire. The relative presence of these characteristics has long been deemed controlling in determining whether a loss may qualify as ‘other casualty.’ See, e.g., Harry Heyn, 46 T.C. 302 (1966); Burrell E. Davis, 34 T.C. 586 (1960), acq. 1963-2 C.B. 4; Ray Durden, 3 T.C. 1 (1944), acq. 1944 C.B. 8. As we observed in Harry Heyn, supra at 309, there are ‘numerous cases involving casualty losses, some of them difficult to reconcile with others either in result, theory, or language. We think a review of these cases would not serve any useful purpose here, since we are satisfied that on the facts before us there was plainly a casualty.’

Respondent urges that in order to be embraced by the term ‘other casualty,‘ an occurrence must be cataclysmic in character. He relies upon Heyn, wherein we held that an earthslide constituted a casualty under section 165(c)(3). We find respondent's reliance upon Heyn for this proposition totally misplaced. In Heyn, we merely observed that the physical characteristics of the landslide in question were those normally associated with a casualty and stated that the landslide ‘involved a sudden and violent movement of a large mass of earth that was cataclysmic in character, and was similar in nature to a fire, storm, or shipwreck.’ Harry Heyn, supra at 307, 308. Nowhere in Heyn did we hold or suggest that a loss must be in the nature of a cataclysm to qualify as a casualty. We simply took notice that the landslide in question was cataclysmic in character. To hold that a loss must be cataclysmic in order to qualify as some ‘other casualty’ under section 165(c)(3) would be to limit the availability of the casualty loss deduction to circumstances which are virtually catastrophic in character.

We think it clear that the magnitude...