Christina A. Alphonso, Petitioner

136 T.C. No. 11 UNITED STATES TAX COURT 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 corpo- in a'building that CV owned.

I.R.C., and leased to a so-called proprietary lease an ration as defined in sec. 216(b), from CV pursuant apartment wall that CV owned collapsed, damage. stockholder-tenants, damage caused by the collapse'of the retaining wall. * P paid to CV the assessment that CV levied against het.

CV levied an assessment against each of (retaining wall assessment) including P, with respect thereby causing certain its to the A retaining P filed a Federal income tax return for her tax- able year 2005 in which she claimed a casualty loss in to the retaining wall assess- an amount that was equal ment and a deduction in a reduced amount as required by the Internal Revenue Code with respect casualty loss. and the claimed deduction with respect loss.

to that claimed R disallowed the claimed casualty loss to that claimed SERVED MAR 162011 It is P's position that she is entitled to a deduction under sec. 165(a) and (c) (3), the alternat ive under sec . 216 (a) , to the retaining wall assessment .

I.R.C., or in I . R . C .

, with respec t Held:

P is not entitled to a deduction under sec. I.R.C., with I.R.C., or sec. 216(a), 165(a) and (c) (3), respect to the retaining wall assessment .

Harvey R. Poe, for petitioner.

Daniel P. Ryan, for respondent.

OPINION

CliIECHI, Judge:

This case is before us on. respondent's motion for sumniary judgment (respondent's motion) .

We shall grant respondent ' s mot ion .

Background The record establishes and/or the parties do not dispute the following.

At the time she liled the petition in this case, pétitioner resided in New York.

During 2005, the year at issue,l petitioner owned shares of stock in Castle Village Owners 'Corp.

(Castle Village) , a coopera- tive housing corporation as defined in section 216 (b) .

Castle Unless otherwise indicated, the factual background pertains to 2005, the year at issue'.

e the Internal Revenue Code in effect for the year at 2Unless otherwise indicated, all section references are to issue. All . (cont inued .

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) 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 bytthe record- before the year at issue; Castle Village constructed on that land, inter alia, 5 multistory buildings in which there are a "total sof 589 apartments." (We shall refer collectively to the tract of land that Castle Village ownéd 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 inathe Castle Village complex to which Caátle Village had allocated the shares of stockein Castle Village that she owned.e-On a date riot dis- closed by the record before the year at issue, petitionerrand 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 of stock in Castle Village and with respect to which she had executed'the propri- etary lease.

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. cont inued) Rule references are to the Tax Cóurt Rules of Practice and ~ Procedure .

3The record does not contain t-he proprietary lease thât petitioner and Castle Village executed. contain a mòdel proprietary lease (niodél proprietary lease) the parties do~noti dispute is materially idéntical etary lease that petitioner and Castle*Village" executed.

Howe¯ver, that to t he propri- the record does The model proprietary lease provided in pertinent part:

WHEREAS,

the Lessor [Castle Village] is the owner the land and the buildings erected thereon at 110- of 200 Cabrini Boulevard, New.York, New York, hereinafter called the buildings.

WHEREAS,

is the owner of the Lessee [the stockholder of Castle Village] the Lessor; which this lease is appurtenant and which have been allocated to apartment Cabrini Boulevard, New York, New York; in the building; shares of to

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 condi- tions hereof, Apartment ___ in the building at Cabrini Boulevard, New York, New York (hereinafter referred to as the "apartment) for a term from , 19__, until December 31, 2036 (unless sooner terminated as hereinafter provided). "the apartment" means the rooms in the buildings as partitioned on the date of designated by the above-stated apartment number, to- gether.with their appurtenances and fixtures and any closets, roof, or portion thereof outside of said partitioned.rooms, which are allocated exclusively to the occupant of the execution of this lease terraces, balconies, As used herein, the apartment.

Rent (Maintenance) How Fixed 1.

(a) The rent (sometimes called maintenance) the determination of such cash requirements.

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 por- tion 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 - Such maintenance shall be payable in edual monthly install- ments in advance on the first day of each month, unless the Board of Directors of ealled'Directors) at the cash requirements shall otherwise direct. Lessee shall'also pay such additional rent ad may be provided for herein when dùe.

(hereinafter its determination of the time of the Lessor 'The * * * * * Cash Requirements Defined (c) Whenever used herein the term "cash require- in cash which the payment of any obligations, from time to time in their judgment ments" shall mean the estimated amount the Directors shall the opera- determine to be necessary:or .proper for (1) tion, maintenance, care, alteration and improvement of the corporate property during the year or sportion of the year for which such determination istmade; (2). the creation of such réserve for .contingencies as they may deem proper; and (3) liabilities or: expenses incurred or'to be incurred, after giving consideration to.(i) income expected to be received during such period (other than rent proprietary lessees) , and (i-i) cash on hand which the Directors'in their discretion may choose to apply. 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. nation 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 con- clusive as to all lessees.

No determi- from The s:

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* * i * * * * * Lessor' s Repairs - The -Lessor shall at its expense keep in good the buildings including all-of the apart- 2. repair all of ments, and its equipment and apparatus except the maintenance and repair of which are expressly stated to be the responsibility of to Paragraph 18 hereof . £43 the sidewalks and courts surrounding the same, those portions the Lessee pursuant '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 maintenance, fixtures, appliances (e.g., refrigerators, air conditioners, ranges), repair, and replacentent of plumbing, gas and heating lighting and electrical fixtures, the lease, including fuse boxes and circuit . ) (continued. .

* * * * * * * Penthouses, Terraces and Balconies 7.

If the apartment includes a terrace, balcony, the the the roof adjoining a penthouse, The Lessee's use'thereof shall be subject or a -portion of Lessee "shall have and enjoy the exclusive use-of terrace .or balcony or that portion of the roof appurte- nant to the penthouse, subject to-the applicable provi- sions of this lease and to-the use of the terrace, balcony or roof by the Lessor to the extent herein permitted. to such regulations as may, prescribed by the Directors . fences, structures or lattices -shall be erected or installed on the terraces, balconies, or roofs of buildings without -the prior written approval of Lessor. the buildings,. nor shall balconies or the roofs of walls thereof be painted by the Lessee without.the prior written approval of i No cooking shall be permitted on any terraces, the from time to time, be No planting, the Lessor.

the the * -* * * * * * * * * * * House Rules 13.

to such House Rules which, 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 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 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.

the Lessee. Breach As provided in paragraph 13 of the model proprietary lease (quoted above) , that lease was su ect to so-called house rules '(. .

. continued) breakers, and electrical wiring running into and .through the apartment.

(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. these areas is limited to building resi- Use of dents and their guests. Pets are not permitted. Residents are reminded to inform their guests and caretakers of to follow them.

the rules since everyone is expected Security guards have been instructed to escort nonresidents off the property if they are not If'a security guard the company of a.resident. does not recognize you as a Castle Village resi- dent, you may be asked to -show identification. Cooperate with him by doing so and telling him your name and apartment number.

in Usage areas in the garden:

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. - .2. Activity has e not been permanently Use sof designated- areas, A¹ Safe Play.....Wading pool, sandbox, climbing A² established (see seasonally published Garden Rulesisi) . A³ . .Activity has not been permanently established - (see seasonally published Garden Rules) . A⁴ . .Activity has not been permanently established (see seasonally published Garden Rules) . B² ; Activity has not been permanently established (see seasorially yublished Garden Rules) . B¹ Qúiet Area. . C ~ Quiet Area. . Pit Active Play . to dusk) (i hour litnit on use when others are waitinc ) All other grass areas may not be useki. Please use the . Sitting, . Sitting, . Basketbali handbali reading picnics reading (10 a.m.

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footpaths at all times The following az'e 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 Bats, sticks, Water balloons .Smoking in any "A" Area Making noise after dusk Urinating Climbing trees - Large water guns racquets or hardballs the landscape • • • • •.

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 .

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Sandbox and wading pool rules (Area A¹) • • • Keep sand in'the' sandbox. the wading , pool . e Drain pool periodically throughout ensure the circulation of clean water. Unplug the drain each evening.

the day to Do not dump sand into sThe record does not contain the so-called Garden Rules to which the Castle Village board house rules referred.

• • Children who are not toilet trained must wear diapers or pull-ups at all times. Follow posted wading pool and sandbox guide- alines.

Trash and garbage Trash barrels are located throughout disposal of garbage and cigarette butts. Soiled dia- pers, used bandages, et cetera must be placed in sealed plastic bags before disposal. garbage resulting from picnics and parties should be taken to the garbage room in your building.

Large quantities of the garden for 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. the Garden Committee organizes this. Please contact plot. residents are invited to pick sprigs for cooking. is located in the circle on'the path between Buildings 120 and 140.

There is also an herb garden from which all them if you would like to use a A subcommittee of It A $25 deposit is required to hold a date.

Advance permission is required from to (fee subject The deposit will Garden gatherings Garden parties of 25 or fewer persons are permitted in Areas A² and A³. the Management Office. change) be refunded if the garden area is left clean and undam- aged. Contact and time for your event. Playspace as a bad weather backup, separate arrangement must be made with the Playspace coordinators. garden is not available for large parties or catered affairs.

the Management Office to arrange a date Tents may not be set up in the garden.

If you wish to use the The 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 retain- ing wall, which was approximately 70 feet high and approximately 250 feet wide, separated the Castle Village 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 damage caused by the collapse of the Castle Village retaining wall.

The assessment that Castle Village levied against petitioner was $26,390 (Castle Village assessment), which she paid.

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).'

Petitioner attached to the 2005 return Form 4684, Casual- (continued...)

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.? 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 retain- ing wall] occurred on Castle Village property, any casualty loss deduction must be claimed by the corporation [Castle Village], and not by the stockholders."

(...continued) ties and Thefts. form, petitioner reduced the amount of the claimed 2005 casualty loss as required by sec. 165(h) (1) and (2) the amount of loss deduction.

in order to arrive at the claimed 2005 casualty In that '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 allege that that determination is erroneous. Therefore, petitioner is deemed to have conceded respondent's determination to disallow 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).

In the petition, petitioner did not 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.

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.

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 individual 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 casualty loss sustained to that property.

See Dosher v. United-States, 730 F.2d 375 (5th Cir. 1984); Draper v. Commissioner, 15 T.C. 135 "Respondent does not concede, but assumes solely for pur- that the loss from the collapse of poses of respondent's motion, the Castle Village retaining wall constitutes a casualty loss under sec. 165(c) (3). Respondent motion that if we were to deny respondent's motion, respondent's position that the loss from the collapse of Castle Village retaining wall does not constitute a casualty loss under sec. 165(c) (3).

indicates in respondent's it would be the (1950). Where a taxpayer has a leasehold interest in property that is damaged by-a--casualty, the taxpayer 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 cottage.

Id. at 741.

Only members of the corporation were entitled to lease lots, and only persons who entered into leases with the corporation were entitled to be members of the corporation.

Id.

The lease that 9Respondent also relies on Orr v..Commissioner, T.C. Memo. 1960-147, and Hine v. Tomlinson, 11 AFTR 2d 315, 63-1 USTC par. 9142 (M.D. Fla. -1962)-, revd. on other grounds 329 F.2d 462 (5th in support of respondent's position that petitioner Cir. 1964), is not entitled to a deduction under sec. 165(a) and (c) (3) with respect to the claimed 2005 casualty loss.

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 to use the property of the corporation, including the artificial lake.

Id.

In 1955, a hurricane de- stroyed the dam, thereby causing the artificial lake to drain.

Id. at 740.

The corporation levied an assessment of $4,500 against each member of the corporation in order to pay for rebuilding the dam and restoring the lake.3° Id.

The taxpayer claimed a deduction under section 165(a) ands (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 sa deduction under section 165(a) and (c) (3) for the assessment that she had paid to the corporation."

Id. at 741.

In so °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 deduc- tions under sec. 165(a) and (c) (3) that restore the artificial lake that the hurricane had destroyed in 1955. Revenue (Commissioner) disallowed the respective deductions that the taxpayers claimed.

they had paid to that corporation to repair the dam and the Commissioner of Internal for the respective amounts those cases, In each of "In Orr v. Commissioner, supra, we also held that the taxpayers were not entitled to a deduction under sec. 165(a) and they had paid to the corporation. (c) (3) for the assessment that (.continued...)

holding, - the -District ' Court concluded:

a Plaintif f clearly- has a property interest in her She has no in the dam orvlake. Her ' leasehold and in the cottage built on it·. property .interest, however, right to use corporate property comes solely and en- tirely from her-membership. the corporate charter and by-laws. Her claim to a casualty ~loss deduction would have more force if her a 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 This right is conferred by in the lake.

West v. United States, supra at 741.

Respondent asserts that the facts in this case are analogous to the facts in West and that under West petitioner is not entitled to a deduction under section ]:65 (a) and (c) (3) with respect to the claimed 2005 casualty-loss.

Petitioner counters that Keith v. Commissioner, 52 T.C. 41 (1969) , is "more recent and more relevant" than West with respect to -the issue preserited here.

" (. .

. continued) In that case, we stated: dresded themselvêà to the verÿ issue that petitioner presents here and appeared to take into account that are pressed upon us in the instant case. same result is called for here."

"The opinions in the West case ad- the same considerations We thi~nk that the In Hine v. Tomlinson, 11 AFTR 2d at 318, 63-1 USTC par.

for' the MÅddle District the U.S. District Êourt 9142, at 87,225, of Florida also, held that the taxpayer was not entitled to a deduction un'der'sec. 165(a)~ arid (c) (3) she had paid to the corporation. , stated: to have resulted from the destruction of dam and lake at Pocono Lake~ Preserve .~ This Court approves and adopts the reasoning of Grim, J., present case."

in West as being sound and directly applicable to the "West and Orr were also cases based upon damages claimed for the adsessment that In that case, that court Id.

^ - T⁶ -- In Keith, a corporation owned a certain tract ofuland in Alabama on awhich it constructed a dam fore the-purposé 'of enlarg- ing a lake that ë¯xisted*on the landic Id. at 41-42. Thereafter, the corporation recorded a restricti e covenant on that tract of land and subdivided thestract into severalilots.

Id.: at -42-43.

The córporation then transferred by deed those lots-tto the respective stockholders of the corporation.

Id. at 43.

In Keith, we described the property to which those deeds pertained as f ollows :

The deeds covered the entire lakebed as well as the adjoining land. ( .None of deeds involved in this case, any, of by Green Valley Lake, beyond referring to the restric- .tive scovenant .

these deeds, or anyi other indicate the portion, the property described therein, that was covered if f:

The taxpayer husband in Keith purchased twoolots from the respective original owners of those lots, who transferred those lots to the taxpayer husband by deed.

Id.

A portion of the land transÌerred unde thî deed perta ning to eac¹ Zo was "Yinder the waters of the lake."

Shortly after the ta payer -husband in Keith purchased the two lots, a flood destroyed the'dam, thereby causing 9the lalie to drain cömpletely .

'Id.

The corporat iori decicied to rebuild the dam.

atN3-44 The cožporation ]Said the cos't òf that, rebuilding by, leOŸing n assessment against the stockholders of the corporation irl mounts that were proportion- ate to.their respective stock interests in the corporation..

Keith v. Commissioner, supra 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) fora the assessment- that the taxpayer husband- had paid to the corporation.

Id.

The Commissioner disallowed 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.4739 (E.D. Pa.,1958).

In doing so, we stated:

* *t* Petitioner's rights in Here petitioner's [taxpayer5husband's] rights in the Lake did not stem from his ownership of stock in GVI [the corporation];' indeed neither the certificate of incorporation nor the bylaws of GVI even purport confer any such rights.. the lake stemmed primarily from his ownership in fee (not merely a lease), subject to the restrictive cove- the lakebed and the land adjoin- nant, of a portion of limited ing-the lake. his rights in the lake in certain respects, 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.

, While the restrictive covenant it also to Disregarding for the moment nant, we think it apparent of his warranty deeds to a part of the restrictive cove- that petitioner, by virtue the lakebed and to - 18- - the adjoining land, possessed valuable property rights in the lake which were destroyed by the flood. [Fn. ref. omitted.]

* * * Keith v. Commissioner, supra at 46.

, According to petitioner, Keith addresses athe specific situation-contemplated in West, whether a shareholder was entitled to a casualty loss deduction when his right to the damaged property, also-a lake in this instance, was conferred by lease, petitioner an easement concluded * property rights in the lake which were destroyed by the likening the petitioner's rights to an equitable flood, * that the petitioner possessed valuable to use the lake.

thus giving * The Court- * * * , easement for the benefit of the shareholders rather than for the benefit of petitioner to take accasualty loss-deduction.

the corporation, thus allowing *' *.* 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 propri- etary 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 coÍlapse of the [Castle Village] retaining wall."

I We reject not only petitioner's assertions regarding Keith v. Commissioner, 252.T.C. 41 (1969), but·also her assertions regarding her alleged property interest in the common areas and "In support of petitioner's claims,- petifioner advances the following assertions:

the unit owners, by virtue of their Propri- While title to the Castle Village grounds and buildings rest [sic] with the cooperative corporation [Castle Village], etary ,Leases to the apartments, combined,with the house rules and memoranda of asythe 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.

the Board of Directors, as well In the In Keith, Id. at 42-43.

in effect, gave Petitioner title to the Board of Directors granted the deed to the lots to the owners (who were shareholders), and also the Board approved and issued the restrictive covenants which gave and stated the reasonable use of the lake for the lot owners. case at hand, Petitioner acquired her Proprietary Lease (and stock) which, her apartment and included the Board approved House Rules, which also gave Petitioner the reasonable use of the common areas and grounds. Charter and By-Laws make it plain that the Corpora- tion's purpose is to provide apartment cooperative ownership for the residents, and this clearly reason- ably included residential use of the common areas and grounds (as provided in the By-Law provision with respect nale in Keith, Petitioner must be considered to have possessed valuable property rights, something akin to an equitable easement for the benefit of the sharehold- ers rather than fòr the benefit of 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.

Thus, by the ¿Court's ratio- Even the Corporate to House Rules).

the corporation, the common grounds of the Castle Village, complex (Castle Village grounds) that she claims entitles her to sa casualty loss deduc- tion.

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, possessed valuable property rights in the lake which were destroyed by the flood."" Id. at 46.

We expressly stated in Keith that the taxpayer husband's rights in the drained lake "stemmed primarily from his "We found in Keith v. Commissioner, 52 T.C. 41, 46 (1969), that under -the applicable law of Alabama "The owners of underlying an artificial lake. and the land bordering upon such lake have property rights in the water by virtue of their owner- ship of able use of ,These rights include the right to make reason- the lake t. " the land.

the land ownership in.fee (not merel-y a lease) * * * of a portion of the lakebed and the land adjoining the lake."" Id.

(fn. ref. omit- ted) 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 consid- ered the model proprietary lease, the Castle Village 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 possessed a leasehold interest, an easement, or any other property interest in the Castle Village grounds that entitles her to a deduction under section 165(a) and (c) (3) for damage to those grounds.

"Petitioner also is wrong in asserting that in Keith we the shareholders rather than the benefit of In Keith v. Commissioner, supra at 47-48, we were "likening the petitioner's rights to an equitable easement for the benefit of the corporation" . found that equitable easement over the lake for the benefit of the corpora- As discussed above, we found in Keith that tion's stockholders. the taxpayer husband possessed a property interest in the lake because of certain deeds under which respective portions of lakebed were transferred to him.

the taxpayer, possessed an the corporation, and not -Id. at 46.

the isThe record does not contain the memoranda of the Castle Village board on which petitioner also relies.

As for the model proprietary lease and the Castle Village board house rules that were made part of that lease by paragraph 13 thereof, that lease provided that Castle Village leased to the tenant "Apartment ___ in the building at Cabrini Boulevard" and that that apartment consisted of the rooms in the buildings * above-stated apartment number, appurtenances and fixtures and any closets, balconies, roof, or portion thereof outside of said partitioned rooms, which are allocated exclusively to the occupant of * * designated by the together with their the apartment.

terraces, The model proprietary lease did not provide that Castle Village 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 peti- tioner a leasehold interest, an easement, or any other property 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 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 petitioner a lease- hold interest, an easement, or any other property interest in the Castle Village grounds that entitles her 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)." Section 216(a) provides in pertinent part:

SEC. 216(a). Allowance of Deduction --In the case of a tenant-stockholder (b) (2)), (not otherwise deductible) paid or accrued to a cooper- there shall be allowed as a deduction amounts (as defined in subsection - ative housing corporation within the taxable year, but only to the extent that such amounts represent tenant-stockholder's proportionate share of-- the "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 property subject 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 to the allowance for depreciation to the income.

(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 section 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 corpora- tion pays or incurs on the property 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:

I-.R.C., § 216 and its predecessor, The stated purpose of I.R.C. is to give tenants-stockholders of § 23(z) 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, The 77th Cong. 2nd Sess. the code purpose of section was enacted to place tenant-shareholders on equal footing with homeowners by allowing deductions (1942-2 Cum.Bull. 504).

§ 216 is not in dispute;

I.R.C.

afor amounts paid to the acorporation for mortgage inter- est andsproperty taxes-to :"pass through" to the tenant- shareholders .

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

* Congress recognized * As the Supreme Court ofithe 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 contir'aryel*egislative intent." Andrus v.

Glover Constr. Co., 446 U.S 608, 616-617 - (1980). Petitioner does not cite any legislative history establishing that Congress intended section 216(a) to permit the stockholders of a coopera- Letive 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 history 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 is to place the tenant stockholders of a the 1939 Code] in the same position as the owner cooperative apartment of a dwelling house so far as deductions for interest and taxes are concerned.

[Emphasis added.]

S. Rept. 1631, 77th Cong., 2d Sess.

(1942), 1942-2 C.B. 504, 546.

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 corporation'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 respon- dent's motion and decision for respondent will be entered.