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shareholders with complete, or near complete, control of the
corporation does not entitle the corporation to a theft loss
deduction, regardless of how embezzlement is defined under local
law. Federbush v. Commissioner, 34 T.C. 740, 752 (1960), affd.
325 F.2d 1 (2d Cir. 1963); United Mercantile Agencies, Inc. v.
Commissioner, 23 T.C. 1105, 1114 (1955), remanded on other
grounds sub nom. Drybrough v. Commissioner, 238 F.2d 735 (6th
Cir. 1956); Ace Tool & Engg., Inc. v. Commissioner, 22 T.C. 833,
842 (1954). In such a situation, the shareholders have the
implied consent of the corporation and take the funds under a
claim of right. Federbush v. Commissioner, supra at 750; United
Mercantile Agencies, Inc. v. Commissioner, supra.
Petitioner and William together owned 100 percent of the
stock of Lakeview at the time when petitioner contends that cash
was skimmed, and petitioner concedes that he received half of the
diverted funds. The same is true regarding the automobiles
provided to them. The diversion of Lakeview's assets was not a
theft for purposes of allowing the corporation a deduction.
Federbush v. Commissioner, supra; United Mercantile Agencies,
Inc. v. Commissioner, supra. This conclusion is buttressed by
the terms of the Redemption Agreement, which was executed in
1991, after the purported thefts. In that agreement,
notwithstanding petitioner's full knowledge of the cash skimming,
neither Lakeview nor petitioner sought to press any claim or
offset against William for the purported embezzlement. On the
contrary, the document acknowledged a debt of $39,079.75 owed by
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