Case: IRS’s Denial of Theft Loss Deduction Proper (T.C.) (IRC §165)

The U.S. Tax Court held that the taxpayers were not entitled to a theft loss deduction and were liable for an accuracy-related penalty, affirming the IRS’s determination. The taxpayers claimed a $2 million theft-loss deduction under section 165 and reported no federal income tax liability. The taxpayers failed to prove that a theft occurred under the Turks and Caicos law when they purchased shares in a gaming company in 2008. The court found that there was no evidence that the sellers misappropriated the funds or made fraudulent misrepresentations at the time of the sale and that even if a theft ...