James P. Shea and Patricia H. Shea - Page 19




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          Respondent asserts that petitioners have failed to prove that the           
          requirements for a theft loss have been met.  We agree.                     
               In order for a deduction to be allowed under section 165(a),           
          the loss “must be evidenced by closed and completed transactions,           
          fixed by identifiable events, and, except as otherwise provided             
          in section 165(h) and �1.165-11, relating to disaster losses,               
          actually sustained during the taxable year.”  Sec. 1.165-1(b),              
          Income Tax Regs.  For purposes of section 165(a), a loss arising            
          from theft is sustained during the taxable year in which the                
          taxpayer discovers the loss.  See sec. 165(e); sec. 1.165-                  
          8(a)(2), Income Tax Regs.  The term theft includes, but is not              
          limited to, larceny, embezzlement, and robbery.  See sec. 1.165-            
          8(d), Income Tax Regs.  Whether a theft within the meaning of               
          section 165 has occurred “depends upon the law of the                       
          jurisdiction wherein the particular loss occurred.”  Monteleone             
          v. Commissioner, 34 T.C. 688, 692 (1960).                                   
               Petitioners urge us to find that a theft occurred based                
          primarily on the fact that they did not recover the funds which             
          were transferred to Quotum’s bank account in January 1992.  They            
          claim that they were defrauded since the funds advanced have                
          vanished, and they never acquired any Russian airplanes.                    
          Petitioners bear the burden of proving that a theft has occurred            
          and that the requirements of section 165 have been met.  See Rule           
          142(a); Allen v. Commissioner, 16 T.C. 163, 166 (1951).  In order           





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