Case: Theft Loss Deduction Not Available Requires Known Prospect of Recovery to Claim (Fed. Cl.) (IRC §165)

Taxpayers are not entitled to a theft loss deduction in 2004, for a loss discovered in 2002, where the court concluded that reasonable prospects of recovery through arbitration or restitution were unknowable at the time, the Court of Federal Claims held. The taxpayers were victims of a fraudulent investment scheme and sought a refund of taxes based on the losses incurred as a result of the scheme. The taxpayers couldn’t claim the theft loss in 2002 or in 2004 because it couldn’t be ascertained with reasonable certainty that they could receive reimbursement for their losses. [Adkins v. United States ...