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recovery cannot realistically be expected, the loss deduction
need not be postponed. Gottlieb Realty Co. v. Commissioner, 28
B.T.A. 418, 420-421 (1933). Alternatively, if the taxpayer’s
claim is not speculative or wholly without merit, and if the
taxpayer believes that the chance of recovering the loss is
sufficiently probable to warrant bringing a lawsuit and
prosecuting it with reasonable diligence to a conclusion, the
taxpayer may have to wait until the conclusion of the lawsuit to
claim the loss deduction. Estate of Scofield v. Commissioner,
266 F.2d 154, 159 (6th Cir. 1959) (regarding a theft loss), affg.
in part and revg. in part 25 T.C. 774 (1956).
IV. Analysis
A. Introduction
RTA, which was formed to exploit the TTS, discharged its
employees and ceased business in 1991. At that time, all it had
to show for its investment in the TTS were its unfulfilled
contract rights under the agreement, the possibility of success
under the lawsuit (which was much the same thing), and a
potential liability under the counterclaim. The principal relief
RTA sought in the lawsuit was not money damages but completion of
the agreement, delivery of the TTS, and the protection of RTA’s
nationwide developmental rights. We must determine not only
whether RTA’s claim had some minimal chance of success but also
whether such success would ring hollow because of EDS’s lack of
resources.
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