concurring: While I concur in the result, I am unable to join with the majority for two reasons. First, the parties limited the issue presented for our determination to whether the petitioner’s claimed casualty loss was compensated for by insurance. By not limiting their decision to the issue as framed by the respondent and contested by the petitioner, the majority imposed on the petitioner a greater burden than to disprove the respondent’s deficiency determination. See Baird v. Commissioner, 438 F. 2d 490 (C.A. 3, 1970); William B. Turner, 56 T.C. 27, 33 (1971) (dissenting opinion).
Second, even if the issue was not so limited, as the petitioner’s theory of recovery could not under any circumstances result in a decision in his favor, it is my opinion that the case should have been decided on that ground rather than on his failure of proof. In other words, before attempting to decide whether the petitioner sustained his burden of proof with respect to the facts, we should determine whether the alleged facts were sufficient to establish a casualty loss. See Rule 21, Tax Court Rules of Practice.
Construing the facts alleged by the petitioner in a way most favorable to him, they are as follows: The petitioner claimed a $500 casualty loss for storm damage to his sailboat on August 27,1965. That loss was covered by insurance. However, the petitioner did not file a claim for the loss.
Section 165(a) allows as a deduction any loss sustained during the taxable year and “not compensated for by insurance.”1 Section 1.165-1(a), Income Tax Kegs., refers to any loss “not made good by insurance * * These two statements are of the same import and both refer to the loss being “made good” or “compensated” by insurance. Both these statements refer to the loss, i.e., insofar as a claimed casualty loss is concerned the casualty loss being “made good” or “compensated” by insurance.
Although the loss was insured, the petitioner elected not to file a claim, not on the belief that the claim would be contested or disallowed,2 but on the belief that the filing of the claim would result in his inability to renew his policy. It is clear that under these circumstances the petitioner had no casualty loss in 1965 which was “not compensated” or “made good” by insurance within the meaning of the statute and respondent’s regulations. Any economic disadvantage which petitioner may have sustained was not as a result of any casualty Joss not being compensated for by insurance but rather was as a result of his choosing not to accept the funds available in compensation for any casualty loss.
Under such circumstances any economic disadvantage resulting to petitioner from injury to his boat could not be a casualty loss “not compensated for by insurance” but was a disadvantage resulting from petitioner’s choice not to pursue the right which he had for strictly personal reasons. Just as an insurance payment with respect to personal property results in a nondeductible expense, so the choice not to take the compensation available under an insurance policy results in a nondeductible personal loss.
Sections 1.165-1 (d) (2) (i) and (d) (2) (ii), Income Tax Kegs., do not deal with circumstances where a taxpayer deliberately chooses not to receive a collectible insurance payment. Section 1.165-1 (d) (2) (i), Income Tax Kegs., is concerned only with the proper year of the loss when a claim has been made for reimbursement. Section 1.165-1 (d) (2) (ii), Income Tax Kegs., refers to the portion of the loss “not covered by a claim for reimbursement with respect to which there is a reasonable prospect of recovery.” It is clear that this provision of the regulations refers to losses in excess of insurance coverage.
Regardless of whether or not a loss was incurred, that loss was compensated for by insurance and thus no casualty loss could exist under section 165(a). See Kentucky Utilities Co. v. Glenn, 394 F. 2d 631 (C.A. 6, 1968).
The taxpayer in Kentucky Utilities Co. v. Glenn, supra, claimed a right to deduct the sum of $44,486.67 on its 1953 tax return as an uninsured loss. This was the sum which the taxpayer did not recover out of approximately $150,000 damage to a turbo generator which was insured with Lloyds of London for $200,000 subject to a $10,000 deductible provision.
Lloyds never disputed its coverage of the loss, but did insist on its right of subrogation to the taxpayer’s rights against Westinghouse, the supplier of the turbo generator. Westinghouse disputed any liability under its warranty of the generator.
Ultimately, as between the three disputing parties, Westinghouse paid $65,550.93 of the total cost of repairs; Lloyds paid $37,500, relinquishing any right of subrogation against Westinghouse, and the taxpayer assumed responsibility for the remaining $44,486.67 worth of damage.
The District Court held that the taxpayer had sustained an uninsured loss of $10,000 because of the deductible feature of the policy. The court found as a fact: .
6. For business reasons, * * * [tbe taxpayer] did not want any litigation brought against Westinghouse. Moreover, because of possible difficulty in retaining insurance of this character on its equipment, * * * [the taxpayer] did not want Lloyds to pay all of the loss except the $10,000.00 deductible under the policy.
8. * * * [the taxpayer] voluntarily assumed $84,486.67 of the cost of repairs to the generator to protect Westinghouse from suit by Lloyds and to avoid difficulty in obtaining insurance with Lloyds. The expenditure of $34,486.67 in this manner does not constitute (a loss * * *
In upholding the findings of the trial court that the voluntary assumption of part of the cost of repairs to the generator did not constitute a loss, the Court of Appeals held that the trial court’s findings of fact were not clearly erroneous, and that the loss was not an “uninsured loss.”
In my view, the Kentucky Utilities Co. case should control. It is true that the loss was incurred prior to 1960, the year in which the regulations applicable to the instant case were issued. However, those regulations were applicable at the option of the taxpayer in the Kentucky Utilities Co. case (see sec. 1.165-1 (d) (4), Income Tax Begs.), and in any event the regulations merely amplified the prior regulations as interpreted by the courts. Louis Gale, 41 T.C. 269 (1963).
The instant case is to be distinguished from Broderick v. Anderson, 23 F. Supp. 488 (S.D.N.Y. 1938). In the Broderick case, the taxpayer discovered an embezzlement loss in 1929. A claim was presented to the taxpayer’s insurance company in 1930. The insurance company rejected that claim in 1930. The Broderick case 'involved the proper year for the deduction of the loss rather than the question presented by the instant case of whether a taxpayer can deliberately choose not to receive a collectible insurance payment.
Any loss sustained by the petitioner resulted from his election not to claim compensation rather than from the casualty loss not being compensated for by insurance. We would certainly not allow a taxpayer to have a deduction for a bad debt loss when the facts showed that he could have collected the debt but chose not to do so for some personal reason. There is no substantive difference in the two situations.
There have been times when the surtax rate applied to individuals was as high as 91 percent. See 1 C.C.H. 1945 Fed. Tax. Bep. p. 106. It would be unreasonable to assume without specific direction by Congress that the tax law was designed to put a taxpayer in the position to choose between the recovery of a loss from the Government through a deduction or the recovery from his insurer.
Prior to the Revenue Act oí 1804, 28 Stat. 509, a deduction was available for losses that were not “covered” by insurance. Seidman, Legislative History of Federal Income Tax Laws, 1938-1861, p. 1018.
It is clear tiiat if the event was a loss within the meaning of sec. 165, it would give rise to a claim under the petitioner’s insurance policy which insured the boat against any damages resulting from perils of the sea.