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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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