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as a deduction under section 165(a), a loss must be evidenced by
closed and completed transactions, fixed by identifiable events,
and * * * actually sustained during the taxable year.” An
essential inquiry under the “closed transaction” concept is
whether, in the year the deduction is sought, there exists a
substantial possibility that the alleged losses could be recouped
by actions against responsible third parties or otherwise. E.g.,
Ramsay Scarlett & Co. v. Commissioner, 61 T.C. 795, 807 (1974),
affd. 521 F.2d 786 (4th Cir. 1975). When such a claim exists, no
portion of the loss with respect to which reimbursement might be
received is sustained until it becomes reasonably certain that
reimbursement will not be received. Sec. 1.165-1(d)(2)(i),
Income Tax Regs.
B. Reasonable Prospect of Recovery
The existence of a reasonable prospect of recovering from
litigation is determined by the facts and circumstances of each
case. Boehm v. Commissioner, 326 U.S. 287, 292-293 (1945). The
determination is based primarily on objective evidence, Ramsay
Scarlett & Co. v. Commissioner, supra at 812, but the taxpayer's
subjective belief as of the close of the taxable year also is a
relevant factor, Boehm v. Commissioner, supra at 292-293. The
loss deduction need not be postponed if the potential for success
of a claim is remote or nebulous. Ramsay Scarlett & Co. v.
Commissioner, supra at 811. Also, where the financial condition
of the person against whom a claim is filed is such that actual
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