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Additions to Tax Accuracy-Related Penalty
Section Section
Year Deficiency 6651(a)(1)1 6662(a)
1989 $4,398 $1,100 --
1990 8,656 2,164 $1,731
The issue remaining for decision is whether petitioner is
entitled for 1990 to deduct under section 165 a theft loss in the
amount of $173,000. We hold that he is not.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
At the time the petition was filed, petitioner lived in New
York, New York. He filed his Federal income tax returns for 1989
and 1990 on April 8, 1994.
In 1990, the law firm of Stanley R. Stern, P.C. (Stanley R.
Stern, P.C.) hired petitioner, who is an attorney, pursuant to an
arrangement that included provisions for petitioner's compensa-
tion. All earned legal fees to which petitioner was entitled
during 1990 for his work on behalf of clients of, and other
attorneys with, Stanley R. Stern, P.C. were set aside (escrowed
funds) in an escrow account (escrow account) established by
Stanley R. Stern (Mr. Stern) for those funds and other funds.
Petitioner did not have the authority to withdraw the
escrowed funds (or any other funds) from the escrow account.
Except as discussed below, when petitioner needed money, he
1 All section references are to the Internal Revenue Code in
effect for the years at issue. All Rule references are to the
Tax Court Rules of Practice and Procedure.
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Last modified: May 25, 2011