Rev. Rul. 61-54

The Internal Revenue Service, pending further developments, will not follow the decision of the United States Court of Appeals for the Tenth Circuit in Arthur B. Maurer, et ux. v. United States , 284 Fed.(2d) 122 (1960).

The Court of Appeals, reversing the United States District Court for the District of Kansas, held that a casualty loss to residential property not compensated by insurance did not have to be offset against gains from sales, exchanges, or involuntary conversions under section 1231 of the Internal Revenue Code of 1954.

It is the Service's position that uncompensated casualty losses of the type involved in the Maurer case are within the scope of section 1231 of the Code requiring such offset. This treatment is provided by section 1.1231-1(e) of the regulations, which states that `involuntary conversion' of property as used in section 1231 includes losses upon the complete or partial destruction, theft, seizure, requisition or condemnation of property, whether or not there is a conversion into other property or money, such as payment under terms of an insurance policy.

Although review by the Supreme Court of the United States will not be requested in the Maurer case, the decision will not be followed as a precedent in the disposition of similar cases, and the Service will maintain its position pending further developments on the issue.

¹ Based on Technical Information Release 304, dated February 16, 1961.