- 5 -
A: That's really a matter of when we had this
discussion once before. The minute I handed him money
it was a swindle. The last time -- the last check he
got in my heart, in my opinion, was the swindle.
Q: Right
A: Now, when did I know that, probably a week
later.
Q: Which was in January of 1989?
A: Or December of '88 in that little time frame,
yeah.
Section 165(a) generally provides that there shall be allowed as
a deduction any loss sustained during the taxable year and not
compensated for by insurance or otherwise. For purposes of
section 165(a), a loss arising from theft is treated as sustained
during the taxable year in which the taxpayer discovers such
loss.3 Sec. 165(e); sec. 1.165-8, Income Tax Regs. Thus, even
if we accept, arguendo, that there was a theft of the moneys
invested by petitioner, his testimony belies his claim that the
proper year to account for such a loss was 1990.4
Respondent bears the burden of proof with respect to her
determination of an increased deficiency in the amount of $487
3The record does not demonstrate, with respect to the
purported theft of his investment, that there was a claim for
which petitioner had a "reasonable prospect of recovery".
Accordingly, the provisions of sec. 1.165-1(d)(3), Income Tax
Regs., are not applicable in this matter.
4Furthermore, even if we were to characterize the "business
loss" claimed in the amended petition as a deduction for a bad
debt, petitioner has failed to produce any evidence, other than
his own self-serving testimony, that such a debt became worthless
within the taxable year 1990. Sec. 166(a).
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