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Boulder. Although the lawsuit was filed in July 1991, the facts
that formed the basis of that suit existed in 1990.9
The success of the lawsuit may have depended on further
investigation, but that does not negate Mr. Premji's prospects of
recovery in 1990. The test is whether the taxpayer had a
reasonable prospect of recovery at the end of the taxable year in
which the loss is claimed, not whether the taxpayer had collected
enough information to successfully prosecute legal action.
Qureshi v. Commissioner, T.C. Memo. 1987-153, affd. without
published opinion 843 F.2d 1388 (4th Cir. 1988); see also Geisler
v. Commissioner, T.C. Memo. 1988-404, affd. without published
opinion 955 F.2d 47 (9th Cir. 1992).
Mr. Premji discussed the Amazing Enterprises suit and
several other possibilities for investor recovery with an
attorney in late February 1991. He chose to pursue those avenues
of recovery and signed the attorney's retainer agreement in March
1991. That he was willing to diligently pursue the lawsuit
indicates that his prospects of recovery were reasonable rather
than remote or nebulous. Mr. Premji embarked on his course to
recoup his investment before he filed his 1990 Federal income tax
return on April 15, 1991. Hence, before he claimed his theft
9 A copy of the Amazing Enterprises suit complaint was made
part of the record. The suit was based on the Bank of Boulder's
alleged improper conduct in dealing with M&L's investors and in
handling checks presented for payment during the operation of the
ponzi scheme.
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