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involuntary conversion pursuant to section 1033 is statutory, not
defined by the common law. Indeed, it has even been stated that
"Congress clearly intended to extend the benefits of section 1033
and its predecessor only to public takings and casualty-like
conversions, and the limitation of its benefits to involuntary
conversions--i.e., those 'wholly beyond control of the one whose
property has been taken'--reflects that intent." Wheeler v.
Commissioner, 58 T.C. 459, 463 (1972).
In addition to their common-law conversion argument,
petitioners treat "seizure", defined by them as "to take by
force," as equivalent to theft. Petitioners seek to compare
themselves to the taxpayer in Rev. Rul. 66-355, 1966-2 C.B. 302.
There, the taxpayer's financial manager pledged shares of the
taxpayer's stock to a bank, without the taxpayer's permission, to
secure the manager's personal loan. The bank subsequently sold
the shares to liquidate the loan. Id. at 302. The ruling holds
that the manager's actions amounted to theft for purposes of
section 1033. Once again, petitioners' situation is quite
different. Despite the settlement between Merrill Lynch and
petitioners, Merrill Lynch has never agreed, and petitioners have
not demonstrated, that Merrill Lynch was at fault civilly, much
less criminally. At most, there was only a mutual mistake of
fact between petitioner and Merrill Lynch. Petitioners have
failed to establish that an involuntary conversion has occurred.
Cf. Hope v. Commissioner, 55 T.C. at 1033-1035.
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