Opinion
Docket No. 27154.
1951-06-18
MARTIN A. ROSENBERG, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Gilbert Weiss, Esq., for the petitioner. Elmer L. Corbin, Esq., for the respondent.
Gilbert Weiss, Esq., for the petitioner. Elmer L. Corbin, Esq., for the respondent.
In April 1946 petitioner purchased a home after having it examined and pronounced free from termites. It April 1947 termites were discovered. They had done a small amount of damage. The damage was repaired and the house treated for protection against termites at a cost of approximately $1,800. Held, that the damage done by termites is not ‘other casualty‘ within the language of section 23(e)(3) of the Internal Revenue code. United States v. Rogers, 120 F.2d 244 and 122 F.2d 485; Fay v. Helvering, 120 F.2d 253.
This case involves income tax for the calendar year 1947. Deficiency was determined in the amount of $875.04. The only assignment of error in the petition and the only issue involved is whether the respondent erred in disallowing a deduction of $1,800.74 incurred for damage from termites on petitioner's personal residence which the Commissioner in the deficiency notice held did not constitute a casualty loss within the meaning of section 23(e)(3) of the Internal Revenue Code. We make the following findings of fact.
FINDINGS OF FACT.
Petitioner's individual income tax return for the taxable year of 1947 was filed with the collector for the first district of Missouri at St. Louis, Missouri. He resides with his wife at No. 4 Prado Drive, Ladue 5, St. Louis County, Missouri. He purchased the property in April 1946 for $38.500. Prior to purchase he had the property inspected to determine whether there were termites, by one Schlesinger, a builder and architect of over 15 years' experience. The architect checked the joists with a sharp pointed instrument and by pounding with a hammer and informed petitioner that he was satisfied that the construction was sound. Petitioner thereupon purchased the property, moved into it in September 1946 and has resided therein since that time.
In April 1947 termites were discovered and after Schlesinger had been called and agreed that there were termites an examination was made by an entomologist, a specialist on termites, and it was found by him that damage done by termites was confined to a small area. A joist in the basement, measuring 2 inches by 8 inches, had been affected to a length of about 10 or 12 feet. The rest of the joist was solid and it was only necessary to nail to it a small piece of wood where the joist had possibly been weakened. Also, the sills and jambs of a picture window were affected by the termites to the extent of about 8 or 10 inches. That part of the wood was sawed off and a new piece of wood put in to replace it. Because of damage to the sill of a plate glass window, it was necessary to take the plate glass out and replace the subsill and the finish sill and put in a new jamb and then replace the plate glass. The termite expert treated the entire building for termites. The total amount expended for treatment and the repairs made was $1,800.74 and that amount was claimed by the petitioner as a deduction in his income tax return for 1947 as ‘Damage to No. 4 Prado Drive caused by Termites.‘ The claim was denied.
Termites are social insects and the infestation by the termites in petitioner's home was a colony project rather than the work of a few individual insects. The known presence of termites in a house makes it difficult to sell it.
OPINION.
DISNEY, Judge:
The question presented here, as the parties agree, is whether damage by termites is a loss from ‘other casualty‘ within the language of section 23(e)(3) of the Internal Revenue Code.
The parties do not agree as to whether the question is one of law, that is, an interpretation of the statute. The petitioner appears to contend that the question is one of fact, that since the property had been checked for termites in April 1946 and termites were discovered in April 1947 and only in a small area, the infestation was of recent origin, that is, a short time before discovery, and that therefore the loss was a casualty within the statute. Based upon testimony of a witness acquainted with real estate values that if he knew there were termites in the house he would want to buy the property for from $7,000 to $10,000 less (based upon a fair value of $38,000 to $39,000), petitioner also contends that the damage was much more than the $1,800.74 claimed.
SEC. 23. DEDUCTIONS FROM GROSS INCOME.In computing net income there shall be allowed as deductions:(e) LOSSES BY INDIVIDUALS.— In the case of an individual, losses sustained during the taxable year and not compensated for by insurance or otherwise—(3) of property not connected with the trade or business, if the loss arises from fires, storms, shipwreck, or other casualty, or from theft. * * *
Passing the question as to whether or not there was proper proof of the value of the property before and after the damage done by termites, we consider it settled that damage by termites is not ‘other casualty‘ within the language of section 23(e)(3). The subject has been given careful attention in United States v. Rogers, 120 F.2d 244 and 122 F.2d 485, also, Fay v. Helvering, 120 F.2d 253, affirming 42 B.T.A. 206. The Rogers case says in pertinent part:
* * * The doctrine of ejusdem generis requires the statute to be construed as though it read ‘loss by fires, storms, shipwrecks, or other casualty of the same kind.‘ The similar quality of loss by fire, storm or shipwreck is in the suddenness of the loss, so that the doctrine requires us to interpret the statute as though it read ‘fires, storms, shipwrecks or other sudden casualty‘. * * *
In Fay v. Helvering the Rogers case was followed by the Circuit Court of Appeals, Second Circuit, wherein it was said that:
* * * Even though it had been used alone we should not have held that it covered such a loss as this; * * *. That word denotes an accident, a mishap, some sudden invasion by a hostile agency; it excludes the progressive deterioration of property through a steadily operating cause. * * *
The Court refers to its decision in Matheson v. Commissioner, 54 F.2d 537, wherein it was held there was no ‘casualty‘ when worms had eaten piles upon which a house stood and water had rusted steel reinforcing bars— a gradual process. The Rogers and Fay cases involved damage by termites and both, as well as the Matheson case, involved section 23(e)(3) or its counterpart in earlier legislation.
Hale v. Welch, 38 F.Supp. 754, inclines to the view that whether destruction wrought by termites is a casualty is a question of fact. Though under the above cases we do not agree with such conclusion, we can not find under the evidence here that the damage was done suddenly or even recently, prior to the time of discovery. We think such conclusion would be unwarranted under the evidence. The damage appears to have been done sometime between April 1946 and April 1947 but how soon prior to discovery does not appear.
We conclude and hold that the damage done to petitioner's property by termites was not a casualty within the intendment of section 23(e)(3) of the Internal Revenue Code.
Decision will be entered for the respondent.