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The requirement that the taxpayer's right of recovery be
considered demonstrates that a theft loss must be evidenced by a
closed and completed transaction. See Marine v. Commissioner,
supra at 980; Ramsay Scarlett & Co. v. Commissioner, supra at
810-811; secs. 1.165-1(d)(1), 1.165-8(a)(2), Income Tax Regs.
Whether there is a reasonable prospect of recovery is a
question of fact, determined by examining all facts and
circumstances. Sec. 1.165-1(d)(2)(i), Income Tax Regs.; see
Boehm v. Commissioner, supra at 292-293 (1945); Dawn v.
Commissioner, 675 F.2d 1077, 1078 (9th Cir. 1982), affg. T.C.
Memo. 1979-479; Ramsay Scarlett & Co. v. Commissioner, supra at
811-812.
A reasonable prospect of recovery exists when the taxpayer
has a bona fide claim for recoupment from third parties or
otherwise, and when there is a substantial possibility that such
claims will be decided in the taxpayer's favor. Ramsay Scarlett
& Co. v. Commissioner, supra at 811 (citations omitted). The
taxpayer is not, however, required to be an "incorrigible
optimist", and claims with only remote or nebulous potential for
success will not postpone the deduction. United States v. White
Dental Manufacturing Co., 274 U.S. 398, 403 (1927); Ramsay
Scarlett & Co. v. Commissioner, supra at 811. Thus, the
deduction need not be postponed where the financial condition of
the party against whom the claim is filed is such that no
recovery could be expected. Jeppsen v. Commissioner, T.C. Memo.
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