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the law of the jurisdiction in which the loss occurred. Edwards
v. Bromberg, 232 F.2d 107, 111 (5th Cir. 1956); Monteleone v.
Commissioner, 34 T.C. 688, 692 (1960). The exact nature of a
theft, whether it be larceny, embezzlement, obtaining money by
false pretenses, or other wrongful misappropriation of property
of another, is of little importance provided it constitutes a
theft. Edwards v. Bromberg, supra; see also sec. 1.165-8(d),
Income Tax Regs. Petitioners’ alleged theft loss occurred in
Texas. The Texas Penal Code provides the following definition of
theft: “A person commits an offense if he unlawfully
appropriates property with intent to deprive the owner of
property. * * * Appropriation of property is unlawful if: (1) it
is without the owner’s effective consent”. Tex. Penal Code Ann.
sec. 31.03 (Vernon 2002).
A number of tax cases have addressed this specific issue and
isolated the relevant factors to employ in deciding whether a
taxpayer has proved that theft actually occurred. In Monteleone
v. Commissioner, supra, we held the taxpayer was entitled to a
theft loss deduction. In that case, the taxpayer lent money to
an individual who defrauded her. The taxpayer filed a civil suit
and pressed criminal charges against the individual. In the
civil action, the individual admitted the fraud and agreed to
make restitution to the taxpayer in monthly installments that he
actually paid for 3 months. The criminal action was dismissed
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