- 20 -
1995-342; see also Jensen v. Commissioner, T.C. Memo. 1993-393,
affd. without published opinion 72 F.3d 135 (9th Cir. 1995).
The standard to be applied is primarily objective, but the
taxpayer's subjective attitude and beliefs are not to be ignored.
Boehm v. Commissioner, supra at 292-293; Ramsay Scarlett & Co. v.
Commissioner, supra at 812. The standard is to be applied with
foresight. Ramsay Scarlett & Co. v. Commissioner, supra at 811.
One of the relevant factors is whether the taxpayer has
filed a lawsuit to recoup the loss. Dawn v. Commissioner, supra
at 1078; Scofield's Estate v. Commissioner, 266 F.2d 154, 159
(6th Cir. 1959), affg. in part and revg. in part 25 T.C. 774
(1956). Filing the lawsuit soon after the end of the tax year in
which the loss was claimed suggests that the taxpayer did not
consider the loss a closed and completed transaction. Dawn v.
Commissioner, supra at 1078; see also National Home Products,
Inc. v. Commissioner, 71 T.C. 501, 525-526 (1979).
Unless litigation is speculative or without merit, where the
taxpayer deems the chance of recovery sufficiently probable to
warrant bringing a lawsuit and pursuing it with reasonable
diligence to a conclusion, the taxpayer should postpone the loss
deduction until the litigation is terminated. Scofield's Estate
v. Commissioner, supra at 159; see also Gale v. Commissioner, 41
T.C. 269, 276 (1963).
Another fact which we may consider is whether the taxpayer
ultimately recovered as a result of a lawsuit. Gale v.
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