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June 25, 1991, on which he claimed a $1,319,311 theft loss for
the ZZZZ Best stock.4
Petitioner corporation filed a tax return for its 1987 tax
year on January 3, 1989. It reported unappropriated retained
earnings of $324,760 at the end of its 1987 tax year.
OPINION
A. Theft Loss
1. Background
Petitioner contends that he may deduct the loss on his
investment in ZZZZ Best stock as a theft loss for 1987.
Generally, a taxpayer may deduct a theft loss in the year in
which the taxpayer discovers the loss. Sec. 165(a), (e); Asphalt
Indus., Inc. v. Commissioner, 411 F.2d 13, 15-16 (3d Cir. 1969),
affg. T.C. Memo. 1968-155. Whether there is a theft for purposes
of section 165(e) is determined by applicable State law. Paine
v. Commissioner, 63 T.C. 736, 740 (1975), affd. without published
opinion 523 F.2d 1053 (5th Cir. 1975). A conviction for theft
under State law is not required for a taxpayer to be eligible for
a theft loss deduction. Vietzke v. Commissioner, 37 T.C. 504,
510 (1961). Petitioner bears the burden of proving that he is
4 Petitioner did not explain how he figured the $1,319,311
theft loss amount. On brief, he claimed that he had a $531,480
theft loss when he sold ZZZZ Best stock. This is the amount we
treat as in dispute.
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