Zahirudeen Premji and Carol M. Premji - Page 20

                                       - 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.                     




Page:  Previous  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  Next

Last modified: May 25, 2011