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for lack of reasonable or probable cause to indict. We found the
individual’s admission of theft was sufficient proof, under the
circumstances of the case, that the taxpayer had sustained a
theft loss.
In Qualley v. Commissioner, T.C. Memo. 1976-208, we decided
the taxpayer had not proven that theft occurred. The taxpayer
corporation claimed a theft loss deduction for money diverted to
a separate bank account by its accountant. To prove theft had
occurred, the taxpayer submitted the testimony of its president
and two State court judgments entered in its favor pursuant to
settlement agreements between the parties. The president claimed
he had not authorized certain checks. The president asserted the
“unauthorized” checks were written for the accountant’s personal
benefit. We ruled the taxpayer had not provided sufficient proof
of theft. The president’s testimony alone was not sufficient.
The lack of commencement of any criminal proceeding against the
accountant cast doubt on the reality of the alleged theft. The
taxpayer failed to show any proof the monetary amount of the
alleged theft loss was the same as the amount claimed. We found
the two State court judgments were not sufficient proof that a
theft occurred because the cases had been settled.
We now evaluate the evidence petitioners introduced in
support of the alleged theft.
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