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v. Commissioner, 675 F.2d 1077 (9th Cir. 1982), affg. T.C. Memo.
1979-479.
Mr. King hired an attorney and filed a claim against PNC in
1994 for PNC's failure properly to credit his account. Mr. King
was prosecuting his claim with reasonable diligence in 1994, and
a substantial possibility existed that he would recover his money
from PNC. A panel of arbitrators ruled in favor of Mr. King in
1995, several months before he filed an amended tax return for
1994. Mr. King's claim was ultimately upheld by the Common Pleas
Court of Philadelphia, Pennsylvania, and he was reimbursed by
PNC. Because Mr. King had a reasonable prospect of recovery in
1994, petitioners are not entitled to the loss deduction on their
amended joint return for that year.
The second deduction at issue involves an alleged $11,744
lottery shortage. Petitioners argue that Mr. King was
responsible for paying off two winning lottery tickets with his
own money because one of his newsstand employees had lost the
winning tickets. Normally, the Pennsylvania Bureau of State
Lottery pays for winning lottery tickets by wiring money to the
retailer's lottery account. If the retailer pays the winning
ticket before the money is wired, then the retailer is reimbursed
from the lottery. Petitioners produced two checks drawn on Mr.
King's lottery bank account. Mr. King testified that those
checks were paid to two lottery winners because a former
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