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been verified with petitioner by telephone, and a confirmation of
the sale would have been mailed to him. Mr. McDonnell further
testified that, in accordance with standard brokerage industry
policy and standard Merrill Lynch firm policy (and absent
specific instructions to the contrary), if petitioner had
requested payment of the sale proceeds from a sale of securities,
a check would have been made payable to him as the owner of
record on the statement.6 He stated that such checks are sent by
regular, first class U.S. mail and that, if the check “expires”
(i.e., it is not cashed within a certain period of time), the
amount of the check is redeposited to the customer’s account.
Section 165 allows an individual taxpayer to deduct a theft
loss in the year during which the taxpayer discovers such loss.
See sec. 165(a), (c)(1), (e). Petitioner bears the burden of
proving that a theft (and not, for instance, merely a mysterious
disappearance of the property) has occurred and that the
requirements of section 165 have been met. See Rule 142(a);
Jacobson v. Commissioner, 73 T.C. 610, 613 (1979); Allen v.
Commissioner, 16 T.C. 163, 166 (1951) (absent positive proof, a
6 Mr. McDonnell testified that, because Merrill Lynch was
required to retain records of customer transactions for only 7
years, he was unable to produce copies of the transaction
confirmation slip, the canceled check, or any other records
specifically related to the 1988 sale of petitioner’s 240 shares
of IBM. In fact, he was “amazed” that the 1988 Merrill Lynch
statements pertaining to petitioner’s account were still
available in Merrill Lynch’s microfiche library.
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Last modified: May 25, 2011