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For the 1990 taxable year, petitioner has offered no
evidence with respect to the expenses disallowed by respondent.
Petitioner, however, claims that between $80,000 and $99,000 was
embezzled from his accounts. According to petitioner, employees
of the billing service and the bank conspired to embezzle the
funds. Petitioner asserts that the billing service employee
improperly deposited funds collected from his patients to his
refund account rather than the main account. The funds were then
transferred by a bank employee to petitioner's Columbia Daily
Income investment account, and later a check for $99,000 from the
investment account was made payable to Clackamas Gold & Silver.
Petitioner also asserts that Clackamas Gold & Silver has no
record of the transaction.
Ms. Stanbery testified at the trial in this case. No one
asked her about these transactions. Petitioner did not call any
witnesses from the billing service, the bank, or Clackamas Gold &
Silver to testify at the trial in this case.
Section 165 allows a deduction for a theft loss sustained
during the taxable year and not compensated for by insurance or
otherwise. Sec. 165(a), (c)(3). Section 165(e) provides that
the deduction for such a loss is treated as sustained in the
taxable year in which the taxpayer discovers the loss. Thus, a
loss arising from theft is not deductible in the taxable year in
which the theft actually occurs unless that is also the year in
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