Joseph B. Leonard and Dorothy A. Cole Leonard - Page 11

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          loan did not clear, Mrs. Leonard obtained an extension of the loan.         
          Robert later repaid only a portion of the loan, and Mrs. Leonard            
          was required to make up the difference.                                     
               We believe the understanding between Mrs. Leonard and Robert           
          in the 1983 transactions was similar to their treatment of the              
          initial $75,000 loan in 1982.  While Mrs. Leonard expected the              
          return of her money, and while she might have expected some sort of         
          financial benefit if Robert had success with his investments, her           
          primary purpose in providing the money was to benefit Robert and            
          Suzette.  In essence, the moneys advanced to Robert were                    
          noninterest-bearing loans.  Indeed, petitioners stated on their             
          1983 return that the purpose of the various loans was "to assist            
          family members with financial difficulties; hence, funds were not           
          used to acquire investment property or other assets".                       
               In our opinion, the financial arrangement between petitioners          
          and Robert did not give rise to a theft.  As parents, petitioners           
          wanted to assist their children.  In summary, we conclude that the          
          funds were loaned to Robert without the expectation of petitioners’         
          realizing a profit.  Accordingly, petitioners are not entitled to           
          a $650,000 theft loss in 1985,4 and thus are not entitled to a              
          carryover for 1988.                                                         

               4    Even assuming, arguendo, that the financial arrangement           
          between Robert and petitioners gave rise to a theft loss,                   
          petitioners failed to show that they discovered the loss in 1985.           
          Indeed, the record clearly shows that petitioners knew of the               
          loss by the end of 1984.                                                    

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