Court Opinion

ID: 9474732
Source: CourtListenerOpinion
Date Created: 2023-08-05 05:07:20.534939+00
Date Added: 2024-06-11T17:44:18.316460
License: Public Domain

HATCHETT, Circuit Judge,
dissenting.
Conner v. United States, 439 F.2d 974 (5th Cir.1971), on which the majority relies, has no bearing on this case. Conner holds that the Internal Revenue Service may not limit a fire loss tax deduction to cost of restoration rather than the difference in fair market value before and after the fire. Conner does not address the issue present*728ed in this case: what factors may be used to calculate fair market value.
I would hold that a decline in fair market value due to buyer resistance because of fear of a recurrence of flooding is not a permanent loss. The decline in fair market value must be directly related to actual physical damage or to impairment of the taxpayer’s property. Kamanski v. Commissioner, 477 F.2d 452 (9th Cir.1973); Pulvers v. Commissioner, 407 F.2d 838 (9th Cir.1969).
Because market conditions change, a market reflection of immediate buyer resistance is not a fixed measure. “The scheme of our tax laws does not ... contemplate ... a series of adjustments to reflect the vicissitudes of the market, or the wavering values occasioned by a succession of adverse or favorable developments.” Citizens Bank of Weston v. Commissioner, 252 F.2d 425 (4th Cir.1958).
The Finkbohners’ expert appraiser attributed the loss in value to damage to landscaping and buyer resistance. The removal of the homes occurred after the Finkboh-ners’ appraisal of the fair market value of the property. A taxpayer cannot rely on factors not included in the appraisal as evidence that the downward fluctuation is permanent. See Capozzoli v. United States, 753 F.2d 1073 (5th Cir.1985) (unpublished). Even if the removal of the neighboring houses is taken into account and assumed to be permanent, their removal is not an “actual loss resulting from damage to the property,” as required by Treas.Reg. § 1.165-8(b)(l), but is based on the preexisting fact that the area is subject to flooding. See Kamanski, 477 F.2d at 452; Cap-ozzoli, 753 F.2d 1073 (relying on Kaman-ski ). Two factors other than direct physical damage to the property might reflect permanent impairment: reduced access to the property or abandonment “in good sense.” See Pulvers, 407 F.2d at 839; Citizens Bank of Weston, 252 F.2d at 428. Neither factor is present.
The majority has erred by ignoring the intent of Congress to limit the category of deductions included in section 165(c)(3) to a specific few and “other casualty losses” like those few. See Pulvers, 407 F.2d at 839. Congress creates deductions; “the permissible deductions are strictly controlled by the code and equity cannot create a deduction not granted by the code.” Lettie Pate Whitehead Foundation, Inc. v. United States, 606 F.2d 534, 539 (5th Cir. 1979). Only losses intended by Congress to be deductible are deductible.
The law limiting deductions to actual physical loss is well settled.* It is based on an interpretation of congressional intent that has survived for some thirty years. No good reason appears on the record or in the arguments to depart from the law in other circuits.

 The Fifth Circuit decided Capozzoli, in which the taxpayers advanced the nearly identical theory, pursuant to that circuit's local Rule 47.5, which provides for the nonpublication of "opinions that have no precedential value or merely decide particular cases on the basis of well-settled principles of law____’’ Unlike the majority, the Fifth Circuit did not view Conner, which also binds that circuit, as relevant to this case; the court cited it, but concluded that the taxpayers’ attempt to broaden the Conner holding ran afoul of the well-settled principles established in Kamanski and Citizens Bank of Weston.